Oil Could Hit Highs Over Iran War
By Haider Ali
Posted: 16th November 2012 10:22
The reliance on oil for small businesses to function and help facilitate growth in economically advanced countries like the United States and the United Kingdom cannot be underestimated in today’s turbulent climate. What nobody wants right now is a hike in prices, which is sure to be the case should the oil taps of Iran turn off as a response to attacks on their nuclear installations and oil rigs.
Releasing press statements from both the Israeli and Iranian governments has only led to more instability in the markets as each side offer aggressive stances. There was a steady decrease in oil prices when Vladimir Putin called for direct diplomatic talks between the United States and Iranian governments, something that has been required for some time.
Goldman Sachs chief economist predicted should a war break out prices could hit almost $180-$190 a barrel. With the world experiencing a recession, this would only add to the sluggish growth of the worldwide economy as a whole. The Euro crisis as a result would be perpetuated also and this is the last thing people on this continental plate want.
The sanctions that are presently biting into Iran’s economy have had some economic affects however. The Chinese and the Indians have gained lucrative oil deals, despite pressure from the American governments. Iran has also claimed, but not been substantiated by any economic authority that relying less on oil revenue has led to growth in other areas of its economy like green energy, which makes up less than 3% of its internal trade. This is also an area investors may like to analyse.
Should a war break out the only stabilising factor in this mess could be the United States. Despite have its credit rating down graded, investors still trust the country enough to play a leading role and to alleviate any potential problems in the oil market. For instance during the Libyan crisis, a few extra millions barrels of oil were being pumped out by the Saudi Arabian’s at the behest of the Americans to keep up confidence in stock markets.
Even after the war in Iraq the hike in oil prices gradually declined once Iraq’s own oil wells began to be pumped. The difference is a protracted war is more likely in Iran because of the size of the country and the unified stanchness of its opposition to the west for meddling in its affairs. Should a stalemate ensue market confidence will be damaged with oil prices going up leading to inflation thus have a knock on affect on the ability of consumers to buy goods.
If one looks further down the line and envisages the Iranian regime being removed, investors and speculators alike could be greeted with an array of economic opportunities because of Iran’s natural gas and vast oil reserves. The war itself will open up avenues in the weapons trade and there’s no doubt a company like Blackwater will be keeping a watchful eye over matters with the contacts they maintain in Washington.