Concerns over Iran's nuclear plans have caused the price of Brent crude oil to rise 28 cents to $111.09 on the ICE futures exchange. However, there are fears oil prices could double due to international tension.
All eyes are on Europe after tension between the west and the Middle East regarding Iran's nuclear energy programme. The conflict could have a detrimental effect on the price of oil in the wake of possible sanctions taken against Iran by Europe.
After the British Embassy in Iran was stormed and Iranian diplomats subsequently expelled from the UK, possible sanctions could include a restriction on Iranian oil exports. However, any restrictions could harm an already fragile economic climate.
Christopher Bellew, a London based oil trader with Jefferies Bache says the continued worries over Middle Eastern countries are one of the contributing factors to the rise in oil prices.
'If Iranian exports were suspended that would be very significant as the market is tight already.'
Iran is the fifth largest oil exporter and oil accounts for fifty per cent of the nation's budget revenues. Any sanction placed upon them could lead to a full blown recession.
Gordon Kwan, head of energy research at Mirae Asset Management in Hong Kong said 'Oil traders are pricing in a 20% chance of a military conflict with Iran, which could push prices above $200.'
Many debt ridden countries in the European Union (EU) rely on Iranian oil supplies and an embargo could leave them in trouble. Italy, Greece and Spain, all countries in the middle of the Eurozone crisis could be left stranded if trade links are severed.
On November 21st 2011, America has already approved a restriction on Iranian oil meanwhile the EU energy commissioner Guenther Oettinger says there may be a consensus on a complete ban on exports from Iran though no decision has been made yet.
Seth Kleinman, Citigroup Inc's European head of energy research says the conflict could cause an embargo scheduled alongside the winter peak in the Northern Hemisphere where a natural rise in prices are expected.
