Iran Warns Oil Could Reach $200 Per Barrel

Iran's Foreign Relations Vice Minister Manuchehr Mohammadi warned yesterday that global oil prices could hit $200 per barrel if the United States pursues international sanctions against Iran.

Mohammadi’s warning comes after the United Nations on Monday demanded that Iran suspend all nuclear development within a month or face the threat of sanctions.  

Iran responded that it had a sovereign right to nuclear development.  "Clearly Iran does not want to have sanctions imposed, so they want to convey the idea that the cost of these sanctions would be incredibly high," said Tim Evans, an Energy Analyst with Citigroup Futures Research.  "While we can't rule out $200 oil, I think we can assign it a rather low probability," he said.

Tension over Iran's nuclear ambitions has been overshadowed by the bloody conflict in Lebanon.  "It serves (Iran's) interests to create this kind of concern in the world community about the price of oil," said Mark Routt, a senior analyst with Energy Security Analysis. "But there are elements to suggest it might not reach that level."  He said high prices have lead to an increase in non-OPEC production and turned once prohibitively expensive projects like Canadian tar sands into profitable ventures.