Brent oil price could hit $200 a barrel if Iran nuclear facilities targeted

Brent oil prices could well hit $200 a barrel on rising political tensions in the Middle East if Israel makes a decision to attack Iran’s nuclear facilities.

The main worry among crude oil traders is that Israel launches a unilateral surprise attack to try to destroy Iran’s nuclear facilities and that Iran retaliates by closing, even if only briefly, the oil flow through the Strait of Hormuz.

The strait is important because 15.5 million barrels per day of oil passes through it each day, equivalent to a third of the all seaborne traded oil.

The strait has added significance because all the world’s spare production capacity, the first line of defense against supply disruptions, is in Saudi Arabia, the United Arab Emirates and Kuwait.

These exports would be constrained if the gateway was closed.

“It is the $200 a barrel scenario.” says Philip Verleger, an independent consultant who correctly predicted in August 1990 the price rally after Iraq invaded Kuwait.

IAEA Report

Israel’s leadership remained silent on a IAEA report released last week by the International Atomic Energy Agency claiming that Iran might be seeking a nuclear weapon.

Israel’s defence minister warned last week of a possible Israeli military strike against Iran’s nuclear programme and rejected suggestions the Jewish state would be devastated by an Iranian counter attack.

In the meantime, the International Energy Agency (IEA) has said that oil prices could reach $150 per barrel in the near term if investment in the Middle East and North Africa’s oil producing regions falls significantly from the $100 billion per year required.

Iran has insisted its nuclear work is in the peaceful pursuit of energy and research, not weaponry.

US officials have said the report by the International Atomic Energy Agency was unlikely to persuade China and Russia to support tougher sanctions on the Iranian government.

But led by Obama, the US administration is still trying to mount pressure on Iran, both through the United Nations and its own, for fear of what may come should Iran proceed undeterred.

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Brent oil price could hit $200 a barrel if Iran nuclear facilities targeted