On January 23rd, the EU agreed to new sanctions against Iran, including “an unprecedented embargo on Iranian crude oil.” The embargo would likely affect Italy, Spain and Greece the most—and these are countries are also embroiled in the debt crisis.
Iran says it doesn’t need to sell oil to the EU, and has threatened its own ban on EU oil exports and military action to close the Strait of Hormuz (through which passes 20% of the world’s oil). Any closure of Hormuz would not only impact Iranian oil, but Saudi oil as well, and so the US has threatened response and a military crisis could spiral up quickly.
Dan Dzombak, a stock analyst with the Motley Fool, wrote a piece prognosticating that “sky-high oil prices are not as far off as you may think.” Moderate drops in production, he notes, can lead to significant price increases. The IMF is likewise warning of a 20 to 30% oil price spike if Iranian exports are disrupted.
While rising oil prices will mean an increase in prices at the gas pump for Westerners, it could have a far more significant impact in places where a small rice in fuel prices can lead to riots and unrest. This is something to be watched fairly closely.
