How Iran President's Death Shakes Up the Financial Markets
The unexpected passing of Iran’s President has caused a ripple effect in the global financial markets, leading to significant changes in regional and international economic conditions. This event has startled the political world and triggered a series of global consequences that affect everything from oil prices to investor confidence.
The recent President of Iran was Ebrahim Raisi. He was killed in a helicopter crash. The helicopter ran into trouble in heavy fog while returning from a trip to the Iran-Azerbaijan border. The crash resulted in the deaths of all those on board, including Iran’s Foreign Minister Hossein Amir-Abdollahian. The cause of the crash is still under investigation. The incident has led to a leadership vacuum and a potential succession crisis in Iran.
Ebrahim Raisi took office as Iran’s President in August 2021, succeeding Hassan Rouhani. Raisi, a conservative cleric with a background in the judiciary, is known for his hardline stances and close alignment with Supreme Leader Ayatollah Ali Khamenei.
Immediate Market Reaction
The immediate market reaction to the death of Iranian President Ebrahim Raisi was mixed. Iran’s stock market was closed on the day following his death. Experts believe that Raisi’s death is not expected to have a significant impact on the domestic markets unless it leads to an escalation in geopolitical tensions. However, the events in the next few days, including the details of the exact cause of the helicopter crash that led to Raisi’s death, should be monitored. The long-term impact on the markets will depend on how Iran and the international community respond to this unexpected event.
How Much Power Does the Iranian President Wield
In Iran, the President is the head of government and holds executive powers. The people elect the President through a national election process and serve a four-year term.
However, while the President is the head of government and is responsible for implementing government policies, the ultimate authority in Iran rests with the Supreme Leader, who holds significant power over all branches of government, including the President. The Supreme Leader is the highest-ranking political and religious authority in Iran and has the final say on matters of national importance, such as foreign policy and defense.
Therefore, while the President plays a crucial role in the Iranian government as the head of the executive branch, his powers are limited compared to the Supreme Leader, who holds ultimate authority in the country.
Oil Prices
While the change of leadership could alter the trajectory of the future movements of oil prices, the change is unlikely to last. Iran is one of the world’s major oil producers, and any geopolitical instability in the country sends ripples through the oil markets. The death of the President led to a short-term surge in crude oil prices as traders anticipated potential disruptions in oil supply.
The oil prices did move following the death of Iranian President Ebrahim Raisi. Following the confirmation of Iranian President Ebrahim Raisi’s death, oil prices experienced fluctuations. International crude oil prices surged significantly in response to the political uncertainty in oil-producing nations.
The market reaction was mixed due to the uncertainty in Iran, which could lead to volatility in oil markets as investors assessed the impact of the death of Iran’s President on oil production and exports. If there are supply disruptions to Iran’s oil production, it could majorly impact global oil supplies and prices.
Investor Sentiments and the Safe Haven Effect
Global investor sentiment took a hit as risk aversion rose. Safe-haven assets, like gold, saw increased demand.
With the forex markets, forex trading saw an uptick toward the U.S. dollar This phenomenon is common in geopolitical uncertainty, where investors look to safeguard their investments by shifting to more stable and predictable assets.
Following the death of Iranian President Ebrahim Raisi, gold prices surged to new record highs. The spot gold price jumped to a record high of $2450.49 per ounce. This year, the prices have jumped 18.65 percent, outpacing the returns of equities and bonds.
Geopolitical uncertainty drives investors towards safe-haven assets like gold, pushing prices higher. Prices will shoot up as more people buy precious metals as a safe investment option.
Impact on International Relations and Trade
The President’s death could lead to a reorganization or power struggle within Iran’s political landscape. This uncertainty can further complicate the country’s strained relationships with Western nations, particularly the U.S., jeopardizing the fragile nuclear deal and subsequent lifting of sanctions. Any delay in lifting sanctions could stall trade agreements and deter foreign investments, hampering economic growth prospects within and around the region.
The unexpected death of a sitting president can result in a power vacuum, causing political turmoil. In Iran, a country already marked by factionalism and a fragile power equilibrium, President Raisi’s passing could escalate current tensions. This scenario has the potential to destabilize the government and influence Iran’s trade partnerships.
Raisi’s death has a significant regional impact, particularly on Iran’s relations. Iran’s relationship with Saudi Arabia. A successor with a more hardline stance may choose a less cooperative attitude towards Riyadh, potentially sparking renewed conflicts and destabilizing the Gulf region. This situation could have consequences on trade relationships in the area.
The death of Raisi could impact Iran’s relations with other countries. For instance, it’s not expected to significantly impact bilateral ties with Azerbaijan. Similarly, Iranian experts believe that Raisi’s death won’t change the status quo of Iran’s foreign policy with India. However, the Iraqi government declared a one-day national mourning following the death of Iranian President Raisi, indicating the close ties between the two nations.
Any political instability could blow Iran’s economy, which is already struggling with U.S. sanctions, soaring inflation, and high unemployment.
Regional Economic Implications
Neighboring countries heavily reliant on trade with Iran might face economic disruptions. Countries involved in significant infrastructural and energy projects with Iran, such as China and Russia, will closely monitor the political climate for signs of stability before committing further investments.
Future Economic Policies
The direction of Iran’s economic policies remains under a cloud of uncertainty. Economic reforms addressing inflation and unemployment rates might face delays, which could agitate the local business environment and populace. Domestic industries dependent on government contracts or policies will be in flux, operating in a “wait and see” mode until stability resumes.
The Joint Comprehensive Plan of Action (JCPOA) is the nuclear arrangement between Iran and the United States. This landmark accord was reached between Iran and several world powers, including the United States, in July 2015.
Under the terms of the JCPOA, Iran agreed to dismantle much of its nuclear program and open its facilities to more extensive international inspections in exchange for billions of dollars worth of sanctions relief. The deal was intended to prevent Iran from building a nuclear weapon, something Iran insists it doesn’t want to do.
The nuclear deal with Iran has been in flux since former President Donald Trump withdrew from the agreement in 2018. In retaliation, Iran resumed its nuclear activities. President Joe Biden said the United States would return to the JCPOA if Iran complied.
Iran has provided support to Hamas, a Palestinian militant group, including financial assistance, weapons, and training. Hamas and Iran share common goals of opposition to Israel and support for Palestinian resistance against Israeli occupation. Iran’s support for Hamas has been a source of tension between Iran and Israel, as well as with other countries in the region. The change at the top of the Iranian leadership could increase this support and destabilize the region.
Conclusion
The death of Iran’s President is more than just a political development; it represents a pivotal moment with far-reaching implications for the global financial ecosystem. From fluctuations in oil prices and shaky investor confidence to disrupted international trade relations, the repercussions are both immediate and potentially long-lasting.
As the world grapples with this unexpected shift, all eyes will be on Iran’s political landscape and its ability, or inability, to stabilize and chart a clear path forward. International stakeholders must brace for heightened uncertainty and adaptability, policymakers to business leaders. For now, the best strategy for many could be to be cautious and closely watch how the situation evolves.
