Civil War in Iraq Set to Send Oil Prices Into Orbit?

As Iraq seemingly teeters on the brink of civil war, it is prudent to examine the potential implications for the global economy of the country finally heading over the edge. As if the worsening assaults against the British and American forces of occupation weren’t bad enough, it now looks very much like inter-religious strife in Iraq may be heading towards crisis levels. As well as frustrating any hopes for Iraq’s return to relative normality, this has the potential to result in a region wide conflagration, the effects of which on the oil market could be tremendous.

..Whilst any marked increase in the level of disorder in Iraq tends to filter through to some extent to the oil market, it could well be thrown into a febrile panic by the entry of other Middle Eastern states into a full blown civil war. The potential for supply disruption by the offensive actions of military and irregular forces in such a conflict is immense, especially if the theatre of engagement were, as is likely, to extend beyond the bounds of Iraq. Thus, the risk premium on every barrel of oil traded would go up.

Resource Investor