Indiana Grain Company, LLC

Posted: 01/09/12

By: tomgrisafi

If Iran were to close the Strait of Hormuz, Brent crude would surge to between $150 and $200 a barrel, says an oil analyst with Societe Generale.

“We believe it would be relatively easy for Iran to shut down the Straits of Hormuz,” wrote Michael Wittner, in a report to clients.

“A credible threat from missiles, mines, or fast attack boats is all it would take for tanker insurers to stop coverage, which would halt tanker traffic. However, we believe that Iran would not be able to keep the Straits shut for longer than two weeks, due to a US-led military response.”

However, CNBC confirms, the analyst "puts this aggressive action as a low probability event. The more likely scenario is an embargo imposed by the European Union, accompanied by U.S. pressure on other countries to do the same, which could still send Brent prices to the $125 to $150 range."

“An EU embargo is considered likely, especially after the EU reached an agreement in principle on an embargo on January 4th,” wrote the analyst. “When it is announced, depending on the timing and details, we may revise our base case oil price forecast upward.”

Source: CNBC