Iran can hinder global markets

The IAEA said on Thursday that Iran may very well be developing a nuclear warhead to be fitted on to a missile. Although this is not necessarily considered to be “news” for most advanced countries in the world, but for the IAEA (the UN’s nuclear watchdog) to make this clear statement it means that countries that did not want to deal with the issue or had doubt can no longer deny these activities.

Additionally, the F.A.T.F., which stands for the Financial Action Task Force, a global agency that sets standards for how countries should deal with money laundering and terrorist financing said that Iran leads the world in not addressing these activities within its jurisdiction. It singled out Iran as the primary culprit for terrorist financing and money laundering (most likely the money laundering also relates to terrorism in this case).

These two pieces of news regarding Iran relates to the business world in that such concerns, especially the one about Iran developing a nuclear weapon has the power to bring down financial markets. Also, this news can place more pressure on China and to a lesser extent Russia (I say to lesser extent because Russia seems to be agreeing to more sanctions) to agree to tougher sanctions that can shift Iran’s nuclear ambitions. This has the prospect of changing how global trade looks right now in that part of the world.

What I mean by this is the influence of Dubai. Until now, Iran has managed to still conduct trade even though it is under some sanctions and many countries do not want to touch them with a 10 foot pole, directly. Instead, Iran uses Dubai as a hub to do all of its business with all the countries that do not want to deal with them directly. If tougher sanctions are imposed then it could mean that Dubai will be pressured not to do such trade with Iran which could be a game changer.

This would not be easy because Iran represents a meaningful piece of the financial and business pie to the economy of Dubai. Also, China imports oil from Iran, so for them to agree to tougher sanctions they would need to have a very good reason that will make it worth it for them. The US can help China somewhat by easing up on the recent trade issues it has had with them.

Global investors can see certain investments fall in value on this news, while others, like defense/military stocks can increase. Also, countries like Israel, Saudi Arabia and Egypt will be interesting to keep an eye on as they are among the most concerned about a nuclear equipped Iran.