The International Monetary Fund (IMF) has warned oil prices could jump by as much as 20-30 per cent if Iranian exports are disrupted by US and EU sanctions.
In a note the IMF warned that if the West imposed financial sanctions on Iran, it would “be tantamount to an oil embargo”, and would lead to a decline in supplies of about 1.5mn bpd from Iran. This volume of disruption would be comparable to losses in output from Libya last year due to civil war.
Moreover, if Iran goes ahead with a threat to blockade oil exports via the Straits of Hormuz in the Gulf, the IMF said the shock could be even greater.
About a quarter of all oil produced globally, and some 40 per cent of all oil exports - including those from Iraq, Kuwait and Saudi Arabia - are shipped through the Straits each year.
"A blockade of the Strait of Hormuz would constitute, and be perceived by markets to presage, sharply heightened global geopolitical tension involving a much larger and unprecedented disruption," the IMF said in a note to the Group of 20 leading industrialised countries.
The oil stockpiles of major oil consuming countries are lower than usual, while the big oil exporting countries have limited short-term ability to increase supply, the IMF said.
Iran is the world's fifth-largest oil producer, extracting 3.5mn bpd.
