Al Arabiya - By Nadine Hani - The sound of war drums against Iran rises day after day. Israel's view is that any delay in bombing Iran would allow Tehran to move its nuclear facilities deeper underground in different sites, dispersed across the country, in a way that would make a strike inefficient.
Any Israeli attack would draw in the United States to take part in it, because current president Barack Obama cannot afford to appear “weak” in not backing Israel during his re-election campaign. And despite the resumption of diplomatic talk between Iran and the World powers in the last few days, Israel was quick to criticize the negotiations saying Iran was not serious about giving up its nuclear ambitions.
So, with the increase of the prospects of war with Iran, it becomes necessary to consider the impact on global oil prices. Iran is the world's forth oil producer and enjoys a strategic geographical location close to the Strait of Hormuz through which 20 percent of global oil shipments pass and which Tehran threatened several times to block.
If an Israeli-American strike targets Iran's nuclear facilities, the most optimistic assessments say Iran's nuclear progress would only be slowed down and not disrupted. But an attack could halt the production of Iranian oil for a few months, prompting prices to surge above previous record levels of $145 pb before the international financial crisis. Saudi Arabia, with the World’s largest spare capacity of 2.7 million barrels per day, would raise its oil production, and the International Energy Agency (IEA) would release its strategic oil reserves to fill in the shortage of oil in global markets. This will ease the pressure on prices a little, but the world will not have any additional spare capacity to deal with other oil crises, should there be any.
The worst scenario is if Iran responds to any military attack by blocking the strait of Hormuz. Despite the existence of the U.S. fifth fleet in the area, some strategists say Iran is capable of disrupting major part of oil supplies through the strait. It could do so by laying mines in the Strait of Hormuz or by threatening Gulf oil infrastructure. This would be a nightmare scenario for global oil markets and it would be difficult to predict the level that oil prices could reach at that point.
It's noteworthy to mention an analysis by famous investor Marc Faber, known as Dr. Doom for being successful to predict a number of economic crises. Faber pointed out that the United States, following its recent gas discoveries, has an interest in a war with Iran. According to him, the United States is not capable to contain the growth of China's economy, the biggest rival to the U.S., without disrupting oil supplies from the Middle East on which China has become greatly reliant. For the past two years, China has been the biggest buyer of Saudi oil.
But the cost of oil price surge will be heavy on the global economy as a whole. According to the general rule, any increase of oil price by $10 per barrel will cause any oil-importing country to lose between 0.1 to 0.5 percent of its GDP growth.
In the United States, which does not have enough resources to fund a new war, the Federal Reserve will resort to printing money through another round of quantitative easing, which might prop up the price of commodities and possibly the equity markets.
These scenarios seem like an imaginary story not supported by logic. But aren't reckless adventure always taken by politicians?
(The writer is a senior business news presenter at Al Arabiya and can be reached at
. She can be found on Twitter at: @Nadine_bn. This article was first published in An Nahar newspaper on March 8, 2012 and translated by Mustapha Ajbaili, who can be reached at: