The Iran-US Crisis explained and how it affected economies and market

After almost 2 years of tensions between US and Iran, both the states now seem to pull back from the brink of war. Let’s see how this has impacted economies and market. 

BY RADHIKA SETHI | 5 MIN READ 

A brief history of US-Iran Crisis. 

War between Iran and US has been going on for 20 months now after President Trump withdrew the iran nuclear deal re imposing sanctions on Iran that crippled Iran’s economy and intending to enforce even tighter sanctions. 

However, the tensions dates back to 1953 when US and British intelligence agencies organised a coup to overthrow Iran's democratically elected Prime Minister, Mohammad Mossadeq who had attempted to nationalise Iran's oil industry.

This followed events in 1979-81 where the US embassy in Tehran is seized by protestors and American hostages are held inside for 444 days. 

In 1988, The American warship USS Vincennes shot down an air flight in the Gulf on 3 July, killing all 290 people on board. The US says that it was mistaken for a fighter jet. 

In 2002, President George Bush announces Iran as a part of the ‘axis of the evil’ leading to outrage in Iran It was believed that Iran is developing nuclear facilities including Uranium enrichment plant this led to several sanctions being imposed on the UN, the US and the EU against ultra-conservative president Mahmoud Ahmadinejad's government. This causes Iran's currency to lose two-thirds of its value in two years.

In 2015, Iran agreed for a nuclear deal with a group of world powers known as the P5+1 - the US, UK, France, China, Russia and Germany which severely limited its nuclear activities and allowed international inspectors. 

The situation worsened when in May 2018 When US President Donald Trump abandons the nuclear deal. Iran’s economy fell into recession. 

Relations in the Recent years. 

Relations between the two nations worsened in May 2019, when the US tightened the sanctions targeting Iran's oil exports. In May and June 2019, explosions hit six oil tankers in the Gulf of Oman, and the US accuses Iran.

On 20 June, US military drone was shot down by the Iranian forces. 

Iran begins rolling back key commitments under the nuclear deal in July.

On 3rd January 2020, Iran’s Top and most revered commander Gen. Qasem Soleimani is killed in a drone strike by US. Iran retaliated by hitting American bases and troops in Iraq with ballistic missiles.

Impact on the Economies and Market. 

The global market has turned cautious after the killing of Qassem Soleimani in an air strike by US. US stock futures fell and Asian shares reversed gains, while oil spiked along with the yen and gold.

Iran’s Economy has been crippled by the sanctions imposed on it by the US. Iran faced the third-largest contraction of any national economy in the world during 2019, something very close to 10 percent," said Hussein Ibish, senior resident scholar at the Arab Gulf States Institute in Washington. Iran’s fiscal gap widened as oil sales plummeted to 90% due to the sanctions. 

India Inc’s chief executives are looking closely on the tensions going on in the Middle East. While three-fourth of top executives fear that tensions will impact the world economy and India adversely, a majority of them continue to affirm that their businesses will not be impacted, at least not yet.

In a poll by Money control, 68% of the people believed that this crises would delay a possible recovery in Indian Economy. 

Trump's attack order impacted Sensex as well. It was a mayhem on Dalal Street on Monday when investors collectively lost Rs 3 lakh crore. Sensex decline by 788 points. Rupee fell below 72 against one dollar. Gold prices hit a lifetime high of Rs 41,730 for every 10 grams. Hence it’s ramifications are proving to be detrimental for the indian economy as well.