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One of the reasons there is still a strong bid in the oil market is the concern over Iran's nuclear development program.

Any attack by Israel or the United States to destroy nuclear facilities will surely result in a response from Tehran, which will likely involve shutting down the Strait of Hormuz through which flows much of the Middle East's oil (15.5 million barrels a day).

Any such shutdown means that countries will have to tap into their strategic reserves to make up for lost oil imports from the region.

For western nations, the International Energy Agency (IEA) can deliver an average of 10.4 million barrels a day and an additional 4 million barrels a day of refined products in the first month of a cutoff of supplies from the Middle East. The IEA also has the ability to deliver 4 million barrels of crude oil a day for up to a year.

But there is a problem for Asia's emerging economic giants – China and India. Both countries have very limited strategic petroleum reserves.

And these two countries are two of the biggest importers of Iranian crude oil. According to statistics from the U.S. Department of Energy, China and India account for a third of Iran's exports of 2.6 million barrels of oil a day. Iran is the third largest supplier of crude to China, behind only Saudi Arabia and Angola.

The Chinese government's strategic oil plan calls for a reserve of about 500 million barrels which is equivalent to 100 days' supply. So far, China has a bit more than 110 million barrels of oil stockpiled and it plans to add 40 million more barrels into the reserve this year and in 2012.

Even though their reserve is still small, China is miles ahead of India. The government there is targeting a reserve of only 40 million barrels of oil – equal to about 2 weeks of supply – by the end of 2012.

So far, India has only 9.8 million barrels of oil stockpiled, leaving it wide open to a disruption oil from Iran. That country is the second biggest supplier of oil to India, behind only Saudi Arabia.

What does this mean for the global oil market?

It likely means that both China and India may become 'desperate' buyers of crude oil if a disruption of oil from Iran occurs and willing to pay almost any price for oil from anywhere.

Investors can best profit from this possibility by buying exchange traded funds based on crude oil prices. The best of these is the United States Brent Oil Fund (NYSE: BNO) and is based on Brent crude oil futures traded in London.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Profiting From China's And India's Need For Iranian Oil