Last week, oil prices tanked after reports emerged that the U.S. and Iran are making progress after resuming talks on a nuclear deal, a move that could ease sanctions on Iran's oil exports. Israel's Haaretz newspaper reported that the talks are moving forward more rapidly than expected, with the possibility of a deal being struck in a matter of weeks. Deal terms are likely to include Iran ceasing its 60% and higher uranium enrichment activities in return for permission to export as much as 1M bbl/day of oil.
Prospects of reviving the Iran nuclear deal have swung dramatically, from near certain in March 2022 to almost nil by the end of the year and now this. Iran’s dire economic situation is likely to force its hand into eventually accepting monitoring and signing a new nuclear deal sooner rather than later, with the country’s foreign currency reserves having greatly dwindled from $122.5 billion in 2018 to a mere $20 billion in 2021 before recovering to $41.4 billion in 2022. With the rate of foreign currency-denominated capital flight out of Iran running at nearly $ 5 billion per month, Iran is not in a very enviable situation.