On Wednesday, a Boeing 737 plane crashed on the outskirts of Tehran. All 176 people on board were killed, including 82 Iranians, 63 Canadians, 11 Ukrainians, ten Swedes, four Afghans, three Britons, and three Germans. Hours before the jet was airborne, Iran fired missiles on American military bases in Iraq. Iran claimed that a technical failure led to the crash. However, Candian Prime Minister Justin Trudeau is doubtful about Iran’s theory on the crash. President Donald Trump has similar views on this tragic incident.
Iran fired ballistic missiles on US interests in Iraq in retaliation for the US-led killing of Iranian General Qassem Soleimani. Following the missile strike, oil prices rose to their highest level since April. However, as the tension eased, oil prices witnessed the largest single-day fall since November. But, the doubts over the cause of the plane crash could support oil prices’ upside.
World leaders doubt Iran’s explanation
A CNBC report quotes Trump as saying, “It was flying in a pretty rough neighborhood,” referring to the crashed Boeing 737 plane. Canadian Prime Minister Justin Trudeau said that a missile strike could be behind the crash, a Reuters report states. He further added, “The families of the victims and all Canadians want answers. I want answers.”
Initially, Iran was silent on allowing foreign officials to be part of the plane crash investigation. However, Ukraine and Canada continued their negotiations with Tehran. Today, France 24 reports that France’s BEA air accident agency said that it had been “notified of the event by Iran and we have designated an accredited representative to the safety investigation.” Iran also invited Boeing (NYSE:BA) and US officials to join the investigation. But, the US is reluctant to send its citizens to Iran amid heightened tensions.
Effects on oil prices
US sanctions have crippled Iran’s oil exports. Oil prices are sensitive to any fall in global oil supplies. However, if the plane crashed due to a reason like a possible missile strike, troubles could increase for Iran. Tehran’s bilateral relations with other nations, including the European Union, would be impacted. The European Union’s nations are critical to Iran for the implementation of the Joint Comprehensive Plan of Action, or Iran’s nuclear deal with Western powers. In April 2018, France’s President Emmanuel Macron tried to persuade Trump to continue with Iran’s nuclear deal.
Also, any possibility of foul play in the Boeing 737 crash could help Trump justify saying that Iran’s activities in the Middle East are malign. That could mean more trouble for Iran’s oil exports. On Tuesday, the US Secretary of State Mike Pompeo said, “the president had an entirely legal, appropriate and a basis as well as a decision that fit perfectly within our strategy in how to counter the threat of malign activity from Iran more broadly.”
More international pressure on Iran could further destabilize the Middle East region. Since Trump withdrew from the Iran nuclear deal in 2018, attacks on Middle East oil infrastructure have risen. Last year, Houthis targeted Saudi Arabia oil supplies and oil prices soared around 15%. Houthis operate in Yemen with Iran’s support. Today, in a new development, the US implemented more stringent sanctions on Iran.
Read Could the Dow Jones Withstand Iran War after Trade War? for more on how a war with Iran could affect the markets.