Iran has begun increased its stockpiles of uranium and increased its uranium enhancement in response to the pressure being applied by the US since the latter withdrew from the 2015 nuclear deal. What are the chances for further escalation of tensions between the US and Iran and what do these tensions mean for investors?Iran has sought to goad Europe, Russia and China into providing relief from sanctions introduced since the Americans withdrew from the Joint Comprehensive Plan of Action last year. In particular, at the start of July, Iran said it had exceeded the limit set on stockpile of low-enriched uranium under the 2015 nuclear deal, and a few days later declared that it had breached the limits on the degree of uranium enrichment.If Iran did move to obtain nuclear power, Trump

While de-escalation looks possible, there is a risk that tensions rise further, with implications for the global economy and financial markets.The move by Saudi Arabia and its allies to cut diplomatic relations with Qatar and impose a de facto blockade of the country abruptly deepens a key line of fracture in the Middle East. There is a risk that tensions rise further. If Qatar turns to Iran for support, a direct escalation between Saudi Arabia and Iran would be possible. A de-escalation, with concessions by Qatar is more likely, with the latter distancing itself from Tehran, as well as from the Muslim Brotherhood and other movements opposed to regimes in the region. But the current crisis could well be a prelude to further regional flare-ups.Tensions between Saudi Arabia and Qatar are

We expect oil prices broadly to stabilise in 2017—but prices will continue to be affected by geopolitical shocks in the region, which will also create tremors on financial markets.Oil currently seems to have reached its fair value at around USD50 per barrel for Brent crude. We expect prices to average around USD55/b in 2017, while supply continues to adapt to sluggish demand. The agreement between OPEC members on 30 November and with non-OPEC producers a week later should reinforce the trend toward stabilisation, as long as participants comply. Saudi Arabia agreed to a higher production quota for its rival Iran while accepting to curb its own output – an act of appeasement between two countries whose leaders could barely have conceived of such an idea just weeks before. Russia also agreed to curtail output. Whether such an agreement stands the test of time remains to be seen.In any event, due to underinvestment in the oil industry over the past two years, we are unlikely to see a massive oversupply—except in the event of a global economic crisis—and therefore a lastingly lower oil price environment. Overall, oil prices at around USD55 per barrel should boost the stock markets, enabling energy earnings to continue their rebound without overburdening broader economic growth.