October 5, 2009
Raymond James & Associates said this morning that oil markets are ignoring what the brokerage believes is a “better than 50% probability that some type of military confrontation with Iran . . . will occur in the course of the next 12 months.”
“(NYSE:H)ere we are, in the midst of what some are calling a ‘Cuban Missile Crisis in slow motion,’ with the Iranian regime playing hardball and tensions palpably rising in the region, and the oil market just yawns,” Raymond James stated in its “Energy Stat of the Week.”
The brokerage essentially argues that, in the wake of Teheran’s disclosure of a secret nuclear enrichment site, attempts at sanctions by the West aren’t likely to work, and thus it is a very distinct possibility that Israel will exercise military force to prevent Iran being able to build a nuclear weapon.
A conflict with Iran “could have huge implications for the oil market,” according to the brokerage’s oil experts. “The market seems to be oblivious to the fact that Iranian retaliation against airstrikes would almost certainly involve the mining of the (Strait of Hormuz), which could end up blocking all shipments out of the Persian Gulf. This would effectively halt 20% of global oil supply, a supply disruption without parallel since the Second World War.
“Were such a scenario to materialize and persist for several months, it could make the oil shocks of the 1970s look like a picnic,” Raymond James concluded.