Sunday, May 19, 2019
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Defence company stocks rise after US pulls out of Iran deal

Price of crude oil rises as well, but several companies that do business with Iran experiencing stocks decline.

Lockheed Martin

Stocks of several prominent US defence companies have risen significantly after US President Donald Trump announced that the United States would withdraw from the Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA).

Trump made the announcement on Tuesday at 2pm local time, and, shortly after, stocks of companies like Northrop Grumman, Raytheon and General Dynamic all shot up.

The companies, which also include Lockheed Martin, United Technologies, among others, are some of the main suppliers of the US armed forces, building aircraft, missiles and other essential war technologies.

One of the few exceptions was Boeing. Although the company plays a major part in the defence industry, it also has deals worth several billions of dollars with Iran.

Those deals might not happen now that the US has imposed sanctions on Iran again.

Besides stocks of defence contractors, oil prices went up as well shortly after Trump announced his decision to pull out of the Iran nuclear deal.

Iran currently produces about 2.5 million barrels of oil a day, which is about three percent of global demand.

The sanctions Trump reimposed on Iran will not take full effect for six months, but there is a chance Iran's oil exports could fall significantly.

A barrel of Brent crude oil shot up to $77, its highest in more than three years.

Other countries that started doing business with Iran since the JCPOA was signed in 2015 have taken hits as well.

Airbus, one of the world's leading aircraft manufacturers, might lose a significant number of orders as a result of the US pulling out, despite France saying it would continue to honour the nuclear agreement.

French carmakers Renault and Peugeot also saw their stock prices decline more than one percent.

The US move was widely condemned by German businesses, whose trade with Iran was worth about $3.4bn in 2017.

Carl Bildt, former Swedish prime minister, said European businesses would get hit harder by the reinstated sanctions than US companies.

"This is behaviour with secondary sanctions that EU in the past has considered to be utterly unacceptable," Bildt said on Twitter.

The US move has been widely condemned across the globe, by countries that are part of the deal as well as countries that are not.

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