Oil prices jumped to a nine-month high above $105 a barrel on Monday after Iran said it halted crude exports to Britain and France in an escalation of a dispute over the Middle Eastern country's nuclear program.
By Monday afternoon, benchmark March crude was up $2.02 to $105.26 per barrel in electronic trading on the New York Mercantile Exchange, the highest since May. The contract rose 93 cents to settle at $103.24 per barrel in New York on Friday.
Analysts are hopeful Iran's announcement will have "minimal impact" on supplies because only about 3 percent of France's oil consumption is from Iranian sources and Britain hasn't imported oil from the Islamic republic in six months.
So, it really shouldn’t affect anything, right? Don't be too sure.
"The price rise is more a reflection of concerns about the further escalation in tensions between Iran and the West," said commodity analyst Caroline Bain of the Economist Intelligence Unit. "Banning the tiny quantities of exports to the U.K. and France involves very little risk for Iran - indeed quite the opposite, it catches the headlines and leads to a higher global oil price, which is something Iran is very keen to encourage."
Translation: cutting off oil to France and the U.K. has as much to do with spooking the markets and driving up costs as it does making a symbolic show of force. Think about it: who really thinks Iran is willing to post a loss in profit just so it can rattle its saber a little?
Iran's oil ministry said late Sunday it stopped crude shipments to British and French companies in an apparent pre-emptive blow against the European Union after the bloc imposed sanctions on Iran's crucial fuel exports. They include a freeze of the country's central bank assets and an oil embargo set to begin in July.
As many Blaze readers are aware, the EU sanctions, along with other punitive measures imposed by the U.S., are part of Western efforts to halt Iran's nuclear program, which many fear is aimed at developing atomic weapons. Of course, Iran denies the charges, and says its program is for "peaceful purposes."
Iran's Oil Minister Rostam Qassemi had warned earlier this month that Tehran could cut off oil exports to "hostile" European nations. The 27-nation EU accounts for about 18 percent of Iran's oil exports.
Tehran also is considering extending the embargo to other European countries, a semiofficial Iranian news agency reported Monday.
Many critics believe this is part of Iran’s strategy of grabbing headlines and driving up oil prices. And it makes sense: if Iran were to announce the countries it was cutting off all at once, it would have a one-time effect that the markets would eventually address. However, if Iran releases the names of countries that have made the "cut off" list in a "slow drip" fashion, it can milk the market reaction and consequent impact on oil prices for all it's worth.
The head of Iran's state oil company Ahmad Qalehbani was quoted by the Mehr agency as saying that the country would stop selling crude to nations who take action against Tehran.
But who's on the list?
Oh, and in case you were wondering, the full impact of Iran's announcement on the U.S. markets won’t be known until they reopen following the Presidents Day holiday.
The Associated Press contributed to this report.