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The withdrawal of the United States from the Iran nuclear deal could be the catalyst that precipitates the next bear market, according to influential global wealth management group deVere. It warned late on Tuesday that investors should expect an increase in market volatility following the announcement by US president Donald Trump that the United States would be quitting the Iran nuclear deal and reasserting a sanctions regime.

“There will be global stock market sell-offs as the world adjusts to the news,” said Tom Elliott, international investment strategist at deVere Group. “Due to the severity of the US president’s approach, in the shorter term at least it is likely gold and the US dollar may rally on the growing fears of further conflicts in the Middle East breaking out; and risk assets, namely stock and credit markets, may weaken. Oil may rally strongly.”

Elliott said that the Iranian government would likely continue to want to appear to be the reasonable partner, and to work with the Russians and Europeans. A more aggressive stance would lead to rises in gold, oil and the US dollar.

Iran nuclear deal was not a surprise

While the US government’s move had been flagged for some time, it remains to be seen whether the previous international sanctions regime can be restored. In this situation, the Trump administration is already at loggerheads with many of its key allies, along with China and Russia. Its ability to rally western governments to comply with a new sanctions regime on Iran will be more limited than previously and evidence of this will further undermine the standing of the US in the global world order.

At the time of writing there had been no noticeable sell-off from the Nikkei in Japan, which was trading slightly down at 22,365 this morning. Gold was actually down $1.65 at $1315 while Brent crude was trading at $76.67, continuing its relentless rise from the $63 level in early March. If anything, it will be the oil market which will look most interesting for traders over the next few days.

DeVere is stressing that investors should also ensure that their portfolios are properly diversified, in order to avoid losses from unpredictable events in the Middle East and elsewhere.

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Vanya Dragomanovich

Vanya is an award-winning financial journalist who has worked in both television and newswires. She spent over 10 years at Dow Jones covering commodity markets, including metals, coffee, cocoa and oil. She also reported from the floor of the London Metals Exchange, and appeared on CNBC to discuss international metals markets. Since then she has written for several leading financial publications, including serving as commodities editor for FTSE Global Markets.

Vanya continues to cover international commodities markets globally, specialising in particular on metals and alternative energy. She is also the author of a book on CFD trading.

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