Iran May Have a Deal but Iranian Stocks Are Falling

Iran signed the nuclear deal seven weeks ago, and President Obama recently secured the votes to pass the deal in the United States. The new deal will lift economic sanctions that have crippled the Iranian economy for years. As the news broke across the world, Iranian stocks did something unexpected: the market dropped.

On July 14th the nuclear deal between Iran and a group of global powers including the United States was finalized. Since then, the Tehran Stock Exchange has fallen 6.7 percent. Ramin Rabii is the managing director of Turquoise Partners, one of Tehran’s biggest investment houses. Rabii admits that the decline in Iranian stocks was a big surprise and says, “as soon as the nuclear deal was announced, we saw a brief rise, then many investors in Iran took that as an opportunity to take profits, and that had a big and immediate impact.”

Another explanation for the surprising downturn is the drop in the price of global commodities. “Brent crude is down 10 percent since the deal’s announcement. Nearly 70 percent of the companies on the Tehran Stock Exchange are sensitive to the price of oil and metals.” The relief from international sanctions will certainly offer Iran’s economy some help, but the recovery will likely take a long time because of its close relationship with the price of oil. “Alireza Nader, a policy analyst at Rand Corp. explained that the volatility in Tehran’s market is not a surprise and added that, “Economic diversification should be a key goal for the Iranian government.”

Even with the market hurting, interest in Iranian stocks is up since the nuclear deal announcement. Investors from the United Kingdom, Russia, Singapore, and Switzerland have put money into the Tehran exchange through firms like Turquoise Partners. However, U.S. Treasury Secretary Jack Lew warned, “companies seeking business in Iran that sanctions remain in effect until that country complies with its obligations under the nuclear deal. And that, could take time.”

While U.S. sanctions may remain in place, business activity is beginning to spike on the ground. European and Asian companies have had talks with potential Iranian partners about business opportunities there, but no deals have been announced yet. The fall of Iranian stocks is still one of many concerns business investors have cited, but the increase of foreign economic activity is cause for optimism in Tehran.

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