Category: Economy

Markets Are Fearing Iran’s Economic Return

For many investors, oil makes up a big chunk of their investments. Oil recently fell in value due to overproduction. Iran’s re-entry into the global oil market spells doom for Saudi Arabia, Dubai and other oil producing countries.

Investors both rejoiced and feared at the less-than-$30-a-barrel of oil.

Oil isn’t the biggest issue for many analysts. The country’s vast natural resources and a huge population of young consumers would upset the balance of supply and demand in the global market today.

On Wednesday, oil had extremely dropped in value upon the opening of the market. The US Dow Jones industrial average closed down by 1.56% after it failed twice earlier the same day.

Analysts view the US energy industry is the one to suffer heavily from the oil price drop from Iran. North Dakota and Texas are to suffer immensely with companies making u-turns in investments and costs as overproduction bears down on the industry.

However, lower oil prices could mean US consumers’ activities may increase. Consumer spending increases can help propel the US economy at a significant but limited rate.

Iran’s 30% population of investors ranging from 65 dollar-millionaires to 4 dollar-billionaires may also contribute to the US luxury properties market. As they are expected to improve the value of London’s properties, analysts said that for the US and Europe, property markets may improve the same manner Singapore and Hong Kong investors improved real estate in many Western countries.

Demands for Cut to EU Budget

Leaders of the EU met in the latest two day summit to discuss the next seven years of the EU budget and spendings.  The summit ended however with no settlement between the 27 members.

For the tax year starting April 2010-2011 the British Treasury paid in more than £8 billion to the EU budget.  It is one among 12 other states that pay in more to the EU budget than they get back in the form of funding.

The UK’s David Cameron said to reporters- ‘”When we were last here in November, the numbers were much too high: they need to come down, and if they don’t come down then there won’t be a deal.” He added, ‘“Frankly, the EU should not be immune from the sorts of pressures that we’ve had to reduce spending.”

If the EU doesn’t reach an agreement by 2013 the budget would have to be agreed upon next year, which would put long term projects in jeopardy.  Concern has been expressed that further delays would hinder the opportunity for economic recovery, and the fact that a settlement is taking a prolonged period of time isn’t sending a good message to the rest of the members. A Downing Street spokesperson said it was “in our interest to do a deal” and insisted Mr Cameron was trying to reach agreement. Before formal talks began, Mr Cameron met European council president Herman.  Mr Cameron also had some conversations with other heads of government that are in the same position as he is, this includes: Angela Merkel (Germany), Fredrik Reinfeldt (Sweden), and Mark Rutte (Denmark).

In order to duplicate the cuts being made by national governments across Europe, the UK, Germany and other northern European nations want to lower the EU spending increases. France and Italy target investing as an important part of the EU, as investing is likely to create more jobs, and is better for the future.

With having the proposal for a real terms freeze rejected by MPs in October last year, David Cameron combated pressure to convey a real terms cut in EU spending.  The opposition were joined by many of Cameron’s Tories in defeating this – dealing a blow to Cameron’s policy on Europe.