Hello Power Up readers,
Nearly six months into the Iran war, U.S. President Donald Trump's administration is tightening the economic screws on Tehran in an effort to resolve the conflict. In a social media post, Trump promised "Economic Warfare and Isolation on an unprecedented scale," although details were scant.
The U.S. Navy has already imposed a blockade on Iranian oil exports, choking off a vital source of revenue for months.
Importantly, Trump also warned of economic consequences against countries providing "any type of lifeline to Iran." This was after the United Arab Emirates, which accounts for 30% of Iran's imports, on Tuesday suspended all trade activities, commercial exchanges and financial transactions with Tehran until further notice.
Iran, naturally, reacted with defiance to the latest U.S. initiative, though there are increasing signs that the war and the oil embargo are having a severe impact on Iran's economy and currency. It's also worth noting, however, that Iran has weathered punishing economic sanctions for nearly 50 years since the Islamic Revolution of 1979.
How these measures will impact the war is anyone's guess. For now, though, there are no signs that the warring sides are willing to return to the negotiating table.
In the meanwhile, Brent oil prices continued to climb, rising above $94 a barrel today, as the market comes to terms with a realisation that the conflict and the disruption to shipping through the Strait of Hormuz may not be resolved quickly.
But the true stress point in energy markets today is not really crude, but a global oil refining industry that has been pushed to the brink. This could signal that diesel and gasoline prices may remain elevated for years. Deal or no deal, the global energy inflation shock is far from over.
More on this below.
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