WASHINGTON (Sputnik) — The final agreement on Iran’s nuclear program reached on Tuesday will prompt a short-term drop in oil prices due to market uncertainty, experts told Sputnik.
“As the exact timing of the end-of-sanctions are unknown and the ability of the Iranians to increase production are unsure — the announcement of the accord seems to have added to market uncertainty and price volatility in the short-run,” Ball State University Professor of Economics Cecil Bohanon said on Tuesday.
Earlier on Tuesday, Iran and the P5+1 group of countries — China, France, Russia, the United Kingdom, the United States and Germany – announced a final comprehensive agreement on Tehran's nuclear program in exchange for sanctions' relief.
All current sanctions against Iran will remain in place, however, until Tehran’s compliance with the nuclear deal is verified, according to the US Treasury.
Bohanon said the drop in oil prices is not surprising.
“If sanctions on Iran were to end, up to an additional million barrels of oil a day could become available on the world market,” he explained.
Johns Hopkins University Applied Economics Professor Steve Hanke told Sputnik the global market has anticipated the deal with Iran, and oil prices have been weak throughout the past week.
Hanke noted, however, that Iran will need time to return to pre-sanctions oil production level.
“The fundamentals are set for low prices to recover,” he said. “By the first quarter of 2016, it will probably be around $80 a barrel.”
In 2014, Iran produced more than three million barrels of oil a day, ranking seventh among the world largest oil producers, according to the US Energy Information Administration.
