Biden’s sanctions on Iran’s oil are probably going to save the world market from significant disruption

It is anticipated that legislation intended to tighten sanctions on Iranian crude oil will pass into law, placing US President Joe Biden in a difficult position as he tries to strike a balance between geopolitical issues and domestic economic interests.

The US House of Representatives approved a resolution that, according to Bloomberg, would place further limits on Iran’s oil shipments, affecting international ports, boats, and refineries that are engaged in the trade, in reaction to Iran’s recent assault on Israel.

Analysts predict that Biden would proceed cautiously, using waiver power to prevent significant interruptions to the world’s oil supply and minimize future price increases, even in the face of the legislative drive.

Comparing Biden’s policy to the administration’s handling of Russian sanctions during the crisis in Ukraine, analysts surmise that Biden’s goal will be to keep oil prices from rising and keep gas prices for American drivers low.

Although the law suggests a more stringent approach against Iran, Biden is anticipated to choose exemptions in order to preserve stability in the oil markets.

The way the president has handled the oil sanctions on Venezuela, which were extended last week, demonstrates a similar reluctance to sabotage global oil supplies.

While the Biden administration considers the ramifications of the sanctions legislation, analysts of the oil market are mostly optimistic and expect the oil markets to be relatively unaffected initially.

The price of Brent oil, which hit about $92 per barrel in April, shows how sensitive the market is still to supply shortages.

According to ClearView Energy Partners, if the new sanctions are implemented in their entirety, they may raise world prices by as much as $8.40 a barrel, which would provide difficulties for President Biden given the growing cost of gasoline.

Included in a larger package of foreign assistance, the planned penalties are meant to reduce China’s 80% share of Iran’s overall exports, which is its oil.

The law highlights attempts to limit Iran’s access to international markets by extending measures to financial transactions between Chinese and Iranian organizations engaged in oil imports.

Biden has flexibility to minimize unexpected impacts thanks to exemptions, even if the sanctions add another level of risk for companies involved in oil dealings with Iran.

Analysts say that despite the legislation’s significance, geopolitical concerns and the desire to preserve relationships may limit its execution.

According to Fernando Ferreira of Rapidan Energy Group, who was quoted by Bloomberg, the government is unlikely to impose sanctions strictly and only expects a slight decrease in Iranian oil shipments.

But further Iranian aggressiveness against Israel may make Biden’s position more difficult to defend and raise political risks related to the relaxation of sanctions.