War and the Futures Market: Oil Traders Fear an Attack on Iran
By DAVE LINDORFF
Okay, now I’m worried.
There have been several rounds of reports that the war-obsessed Bush administration was getting ready to attack Iran-first last September, then in December, and more recently in January and February.
The one thing that kept me thinking that a catastrophic war with Iran might not be in the offing was oil prices, which didn’t seem to be acting as one would expect them to if there were a major war looming in the Persian Gulf. Oil prices, in fact, have been drifting slowly downward since September 2006, when they hit $68.85. Yet if there were going to be a hot war between the U.S. and Iran, one would expect much higher prices. After all, most of the combat would be occurring along Iran’s heavily armed coastline and in the Gulf, through which over a quarter of all the world’s oil passes. In the event of such a conflict, oil shipments would shut down from that region as underwriters jacked the price of insuring oil tankers in the Gulf to astronomical levels. Estimates of how expensive oil could become in the event of a US attack on Iran, the world’s second largest oil producing nation, have ranged as high as $200/barrel-a level that would bring the global economy to a screeching halt.
Well, there are new reports circulating now that an attack by US air and naval forces could come in early April, and this time, the oil traders are taking them seriously. On Tuesday, oil futures shot up $5/barrel to hit $68/barrel-quite a jump, and the highest price for oil since last September.
Reports say that traders were responding to rumors-unsubstantiated-that Iran had fired on an American ship in the Gulf, and no doubt also to the ongoing tensions over Iran’s capture and detention of 15 British sailors, whom it claims had illegally entered Iranian territorial waters.
Phil Flynn, a trader with Alaron Trading in Chicago, was quoted as saying that the oil market has been “on pins and needles” because of the tensions in the Persian Gulf between the US and Iran.
Adding to worries about oil supplies from the Gulf, no doubt, is the vast armada that the U.S. has amassed up close to Iran’s borders-an armada that includes two fully armed aircraft battle groups, equipped with hundreds of strike aircraft and tomahawk cruise missiles and capable of delivering a crippling blow to Iran’s military and industrial infrastructure.
The Bush administration, while repeatedly insisting it has no plans to attack Iran, has pointedly also stated on numerous occasions that “all options are on the table” in dealing with what it claims are Iraqi efforts to develop nuclear weapons capability. The White House and Pentagon have also been running a propaganda campaign-ominously reminiscent of the run-up to the Iraq invasion–of trying to make a case that Iran is providing technical aid, weapons and training to Iraqi insurgents, particularly in the use of armor-penetrating explosive devices.
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