Sanctions against Iran put cloud over global growth

New sanctions by the US and EU against Iran have ratcheted up tensions and the price of oil as traders worry about the risk of hostilities, including an attack by Israel on Iranian nuclear facilities.

Tightened sanctions by the West have yet to dissuade Iran from pursuing its controversial nuclear programme but have triggered an oil price spike that could trigger a global recession. Oil prices hit a record high in euro terms earlier this month and analysts now believe they may have already dragged the eurozone into recession.

New sanctions by the US and EU against Iran have ratcheted up tensions and the price of oil as traders worry about the risk of hostilities, including an attack by Israel on Iranian nuclear facilities.

US President Barack Obama conceded on Friday that tensions over Iran were “adding a $20 or $30 premium to oil prices”, which are up some 20 percent since December.

IMF chief Christine Lagarde warned earlier that any interruption in oil supplies from Iran could increase oil prices by a further 20 to 30 percent and cause an economic shock. “A sudden and brutal rise in the price of oil” from Brent crude’s current levels of around $125 a barrel “would have serious consequences on the global economy” until other oil-exporting nations were able to bridge the gap, she added. Iran has threatened retaliation against the sanctions, including a possible disruption of shipping through the Strait of Hormuz, a Gulf chokepoint for global oil shipments.

- AFP