The jump in oil prices comes after a six-month stand off between the international community and Iran. Diplomatic efforts have stalled, despite the efforts of Mohammed El Baradei, head of the UN nuclear watchdog.
Last week he said: “We have not seen diversion of nuclear material for weapons purposes, but the picture is still hazy and not very clear”. Two days before, the Iranian president told his country it was now in the club of nuclear nations after successfully enriching uranium for the first time. It was a direct challenge to the international community, and the rise in oil prices highlights the tension. Iran produces four million barrels of oil a day, representing 4.7 percent of global production.
Tehran also controls the strategically important Strait of Hormuz, through which 16 million barrels a day are transported, or about 20 percent of world production. The market is taking threats of conflict seriously. Raymond Carbone, president of Paramount Options, said: “If anything were to happen on the Iranian front, in the Strait of Hormuz, in the region in general, we could see much higher prices than we have right now.”
Other hotspots are also putting question marks over supplies.For example, Nigeria has had to reduce its output by a quarter because of attacks by rebels. All this at a time when global demand for oil has never been stronger, and a French government report warns there might be a peak in world production by2013.