Fear for oil supply after US pulls out of Iran deal

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Divisions in Iran over how it should respond to the USA pullout were illustrated as senior cleric Ayatollah Ahmad Khatami told worshipers at Tehran University on Friday that European nations could not be trusted.

Trump said that he will re-impose even stronger sanctions against Tehran to make the Islamic republic sit at the negotiation table for changes of "flaws" in the deal.

Iran says it aims to raise its crude oil production capacity to 4.7 million bpd within the next four years, though exports might be disrupted if Trump refuses to renew Iran's sanctions waivers next week.

Health care, utilities and consumer-goods companies were among the biggest decliners. Technology stars Alphabet and Facebook later led stocks higher.

European airlines opened up routes, hotel groups and oil companies inked deals. "It's overwhelming nearly all the other sectors in terms of its impact on today's market action", said Michael Arone, chief investment strategist at State Street Global Advisors in Boston. "While this is big news, it is not something that the market hadn't already priced in". I think Rouhani and Zarif need to explain why it's the case that while this agreement was in place Iran continued its march across the Middle East, he asserted. So far this quarter the energy index is up 12.5 percent.

Smaller companies fared better than the rest of the market.

But is the president really willing to alienate any of the countless European and global states that will continue trading with Iran, especially since the latest sanctions cover every major aspect of Iran's economy, most importantly banning oil exports from the country, but also hitting the financial sector and the automotive and aviation industries.

European automakers are urgently attempting to understand the implications of President Donald Trump's decision to withdraw from the nuclear deal with Iran, as the fallout from Washington starts to gather pace.

France's Total, Anglo-Dutch Royal Dutch Shell and Italy's Eni were more active in Iran than US companies, which were still limited by other sanctions unrelated to Iran's nuclear program, including a trade embargo.

Major oil producers from OPEC and non-OPEC members including Russian Federation, the world's top producer, are linked to a deal until the end of the year to cut output by 1.8 million bpd to support prices.

Analysts varied in their view of the data, with RDQ Economics saying it still expects inflation to soon exceed the Fed's target and warning that higher oil prices could push prices even higher.

In another sign global supplies could rise further, data in the afternoon showed USA crude producers added 10 rigs in the latest week.

So why didn't prices keep climbing Tuesday? "The market was pricing in something even more aggressive".

The U.S. sanctions have a 180-day period during which buyers should "wind down" oil purchases, meaning any loss of supply will not be immediately felt - and companies don't have to rush to find alternatives.

Oil prices have been increasing as a result of a number of factors including heightened demand and the crisis in Venezuela. The Nasdaq added 67.46 points, or 0.93 percent, to 7,334.37. "Do they want to do business with a threat?" he asked.

Last year, German automaker Volkswagen began exporting vehicles to Iran for the first time in almost two decades. The rise in yields pushed up interest rates, which allows banks to make more money from loans.

CURRENCIES: The dollar strengthened to 109.69 yen from 109.65 on Wednesday. The euro weakened to $1.1858 from $1.1923. Copper lost 2 cents to $3.06 a pound.

Gasoline futures fell 2.3% to $2.0855 a gallon and diesel futures dropped 2% to $2.1414 a gallon. Britain's FTSE 100 added 1.3 percent.

However, at least three things could end the market's complacency in the coming months.

U.S. stocks notched a second straight day of solid gains after the Consumer Price Index, which tracks costs for household goods and services, rose 0.2% in April, below analyst expectations.