Triggered by Iran's new president's order that UN seals be removed from nuclear facilities, oil futures peaked last fortnight, to a record US$67.10 a barrel. Iran restarted work at its uranium processing plant at Isfahan last week, risking UN sanctions and military action against its nuclear facilities. Iran, supplying about 3% of global daily oil demand (2.5 million bpd), may respond to the sanctions by reducing oil sales. Iran's nuclear energy ambitions are leading to concerns that oil prices may rise above US$75 a barrel in the next three months. Higher oil prices caused by a cut in exports from Iran, may increase inflation in oil importing countries, forcing interest rates to rise and dampening economic growth.
Will this be a repeat of 1979, when Iran's oil exports collapsed after the revolution that brought Islamic government to power and caused oil prices to double to more than US$80 a barrel? The only chance for oil prices to fall will be if Iran is forced to accept a peaceful solution to the conflict. The country's dependence on oil exports, worth more than US$125 million a day at current prices, could force it to seek a peaceful resolution.
A slowdown in the economic growth has been estimated for members of ASEAN, by as much as 1.5% point this year if the price of oil remains above $60 a barrel. ASEAN economies may expand as little as 4.5% this year
23-Aug-05 
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