Iran tensions boost oil prices

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Iran tensions boost oil prices

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Mounting tensions between Iran and the West are sparking concern over possible supply disruptions pushing the price of Brent crude oil above $113 a barrel on Friday, though they did ease by the end of the day in choppy trading due to the dollar’s strength.

Analyst expect more volatility after Iran threatened to shut the Strait of Hormuz, the world’s most important oil route.

That was in response to tighter sanctions from the US and a possible ban on its crude exports to Europe.

“The supply risk regarding Iran is still boiling. On top of this, there is also supply risk from Nigeria,” said Carsten Fritsch, analyst at Commerzbank.

Still, investors are treading cautiously as euro zone debt problems may worsen and drag down major economies, slowing oil demand. An unexpected 2.2 million-barrel rise in US crude stockpiles also weighed on sentiment.

“Oil could see-saw as the U.S. and Iran play brinkmanship,” said Tony Nunan, a risk manager at Mitsubishi, adding that the global oil demand outlook was murky as the eurozone crisis dragged on.

Iran faced the prospect of cutbacks in its oil sales to China and Japan as new measures to block Tehran’s crude exports over its nuclear programme appeared to be hurting its economy.

In Nigeria, Africa’s top exporter, trade unions are threatening to call a national strike starting on Monday.