Perils linked to Iran are escalating so rapidly that an observer needs a scorecard to gauge market effects.
Last month the European Union imposed immediate sanctions on new contracts for Iranian crude oil and a 6-month phase-in of sanctions on existing deals. The move responded to the Islamic Republic's continued enrichment of uranium.
Iran answered by threatening to close the Strait of Hormuz, through which passes 17 million b/d oil.
Since then, tensions have worsened.
As Iran moves nuclear activities below ground, concern rises that Israel, arch focus of Iranian truculence, will strike militarily before targets sink from view.
The US and other allies of Israel have called for restraint. Characteristically, Iran notched up the belligerence. Supreme Leader Ali Khameini went on Iranian television on Feb. 3 to threaten retaliation.
"In response to threats of oil embargo and war," he said, "we have our own threats to impose at the right time."
Unclear amid all this are the sanctions' effects on physical oil markets.
A Jan. 13 research note from Barclays Capital provides a scorecard of sorts.
Barclays analysts think Japan and South Korea, big buyers of Iranian crude, will honor Europe's sanctions.
The question then becomes behavior of two other big Iranian customers, China and India. Both could increase purchases of Iranian oil. But they'd do so at the risk of alienating another important supplier, Saudi Arabia.
They might increase purchases overall and hoard the extra oil in strategic inventories—something China is set to do anyway.
Barclays rates the likelihood of that option high and estimates the consequent crude price at $125/bbl or more.
The next-likely option is refusal by China and India to buy extra Iranian crude. The crude price then: more than $130/bbl.
Barclays assigns "medium" likelihood to no loss of Iranian exports, which would leave crude prices where they are.
But if Iranian exports cease, the price exceeds $150/bbl. Barclays gives that option low probability.
Of course if shooting starts, all bets are off.
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