Tags: Oil | Iran | Hormuz | close

Oil Could Soar 80 Percent if Iran Closed Hormuz, Analyst Says

Tuesday, 10 Jan 2012 12:26 PM

Oil prices could soar by 80 percent if Iran made good on its threats to close the Strait of Hormuz and conduct military exercises, says Michael Wittner, an oil analyst with Societe Generale.

Brent oil, a European crude currently trading at $113 a barrel, could break $200 if Iran closed the Strait of Hormuz, a narrow waterway connecting oil-rich Persian Gulf countries with the rest of the world.

"We believe it would be relatively easy for Iran to shut down the Straits of Hormuz," Wittner writes in a report to clients, according to CNBC.

"A credible threat from missiles, mines, or fast attack boats is all it would take for tanker insurers to stop coverage, which would halt tanker traffic. However, we believe that Iran would not be able to keep the Straits shut for longer than two weeks, due to a U.S.-led military response."

Iran has threatened to close the strait to protest sanctions from the West, who accuse the oil-rich country of pursuing a nuclear program.

Oil prices have spiked on the threats, yet more are doubting whether Iran will actually go through with it since it would disrupt its own flow of crude exports and also likely lead to conflict with the U.S. military.

If fears continue to wane, expect oil to fall, especially since demand is down in major industrialized nations and also due to contingency plans taken by Saudi Arabia and the United Arab Emirates to move crude out elsewhere should the waterway close.

"If tension in the Mideast recedes, the premium that has been built into crude prices is likely to fade, sending crude prices lower," says Morgan Stanley analyst Hussein Allidina, according to the Associated Press.

© 2017 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
283
2012-26-10
Tuesday, 10 Jan 2012 12:26 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved