unintended escalation through miscalculation.¶ "For example, we cannot rule out the possibility that Iran might start to selectively stop and inspect ships travelling through the Strait, a move that could certainly create a broader crisis."¶ In terms of the longer-term – and more likely – impact of the row, the risk is not so much the fallout from a possible closure of the Strait so much as the negative impact A reduction in capacity again adds to the sanctions will have on oil production from Iran, as demand for their product suffers. the risks that the oil price will spike.¶ Since most oil price predictions are based on sluggish global demand as the world economy Iran situation as the single biggest factor that could send wobbles, as opposed to geopolitical tensions, analysts see the the oil price upwards. A higher oil price will, of course, drag on economic growth, as it signals rising costs for businesses and individuals.¶ So will anyone benefit from the stand-off? Perhaps those oil traders with a cool head, who remember that previous bristling over the Strait, as seen in the 1980s, did not leave the waters closed. "Only brave hearts would go against the current move with the risk of a short-term spike looming," said Ole S Hansen, senior commodity strategist at Saxo Bank. "But look out for any news that points towards an easing of the tensions as it could trigger some aggressive selling." ER
unintended escalation through miscalculation.¶ "For example, we cannot rule out the possibility that Iran might start to selectively stop and inspect ships travelling through the Strait, a move that could certainly create a broader crisis."¶ In terms of the longer-term – and more likely – impact of the row, the risk is not so much the fallout from a possible closure of the Strait so much as the negative impact the sanctions will have on oil production from Iran, as demand for their product suffers. A reduction in capacity again adds to the risks that the oil price will spike.¶ Since most oil price predictions are based on sluggish global demand as the world economy wobbles, as opposed to geopolitical tensions, analysts see the Iran situation as the single biggest factor that could send the oil price upwards. A higher oil price will, of course, drag on economic growth, as it signals rising costs for businesses and individuals.¶ So will anyone benefit from the stand-off? Perhaps those oil traders with a cool head, who remember that previous bristling over the Strait, as seen in the 1980s, did not leave the waters closed. "Only brave hearts would go against the current move with the risk of a short-term spike looming," said Ole S Hansen, senior commodity strategist at Saxo Bank. "But look out for any news that points towards an easing of the tensions as it could trigger some aggressive selling." ER
GDI_12___Oil_Link_Core.docx