— This is the script of CNBC's news report for China's CCTV on May 18, 2018, Friday.
Before this, U.S. threatened European companies. The analysts told CNBC that if the European companies continue to cooperate with Iran or do investment there, some of them may withdraw from Iran market amid the high investment risk, even though the European Union and governments have promised to protect these companies' benefits and minimize their loss. And this position has been confirmed recently. Total, the energy giant in French, said in recent announcement that if Total can't get immunity from the U.S. government in the new round sanction against Iran, then Total will end all activities related to Iran gas plan before Nov, 4 this year.
This information is viewed as an important signal. Total became the biggest foreign investor in Iranian energy industry since the U.S. sanctions against Iran eased in 2016. Analysis believes that even though Total is a French company, its financing is mainly US dollar which is from U.S. banks and U.S. investors hold almost one third shares of Total, so Total said they can't bear the sanction from U.S. Total also emphasized that they planned to invest $1 billion dollars on Iranian gad filed though, withdraw from this project will not affect the company's average annual production target.
Therefore, for the company, the reduction of political risk makes the company face less uncertainty in the financial market and that also pushed up stock price recently, during the overnight trading of EU market, Total's stock price increased 1.79%. And from the information, we know that Total is not the only giant to disinvest.
Winter shall, German Energy Company; Maersk Tanker, one of the biggest oil shipping companies in the world; and Danish Thompson Oil Tanker also announced to end cooperation with Iran in recent days. U.S. sanction threat to EU companies has an immediate effect. The withdraw information making market think from a different angle, U.S. sanctions effect against Iran may be more successful than expected before. So for oil price, the high geopolitical risks in the Middle East, especially the potential pressure on Iran's oil production, have all contributed to the recent surge in oil prices. Among them, Brent Crude Oil Futures climbed above $80/barrel shortly in Sunday's trading, hitting a new peak since Nov, 2014; WTI also set a new high since Nov 28, 2014.
Trading friction between the U.S. and its trading partners plus geopolitical risk events making the three major US stock markets closed down overnight, with Dow & Jones industry average decreased 0.22%, S&P 500 declined 0.09% and NASDAQ composite index was off 0.21%.
However, energy stocks can outperform the broader market amid the rise in oil price. Analysts believe that if oil price can increase further or remain at current high level, then it is a positive factor to energy companies, we will keep an eye on this issue.