U.S. sanctions on Iranian oil leave slim margin for future shocks

What to watch: South Korea and Japan will likely end imports, while China and India will buy only low volumes of Iranian crude. Iranian exports may dip to around 500,000 barrels per day, a staggering collapse from the 2.3 million barrels per day it exported one year ago.

But, but, but: While Trump’s plan may look good on paper, it leaves little margin for error in the case of additional oil supply disruptions, especially considering deteriorating conditions in Venezuela and the potential for disruptions in Libya. That’s a recipe for further upward price pressure.

Between the lines: Iran also gets a say in all this, and the market may not have “priced in” the country's response.

• The lower its exports fall, the greater incentive it has to lash out — not just to drive oil prices higher, but to deter Washington from taking even more aggressive moves.
• Iran is unlikely to close the Strait of Hormuz, but it could cause a lot of damage with cyber operations, perhaps against Saudi Arabia.

Robert Johnston is managing director for global energy and natural resources at Eurasia Group and a senior fellow at the Atlantic Council Global Energy Center. Henry Rome is an Iran analyst at Eurasia Group.