Oil prices could spike at $500 on a war between Saudi Arabia and Iran

Jessica Morris
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An employee of the Kuwait Oil Company (K
Oil prices are typically sensitive to geopolitical developments in the Middle East (Source: Getty)

A leading academic has warned a full scale war between Middle Eastern rivals Iran and Saudi Arabia could send oil prices as high as $500 per barrel.

The two countries' long-running regional rivalry is borne out in a series of proxy wars across the Middle East, such as the one which is being waged in Yemen.

But relations soured recently when Iran stormed Saudi Arabia's embassy, following the latter's execution of a prominent Shi'ite cleric. Riyadh cut diplomatic ties with Iran, and it's been joined by Opec members such as Bahrain, the UAE and Sudan.

Analysts are split over how the rift will develop, and what impact heightened geopolitical tension could have on oil prices, which fell below $30 per barrel yesterday.

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But Dr. Hossein Askari, the Iran Professor of International Business and International Affairs at The George Washington University, told Oil & Gas 360 that a full scale war between the two powers risks sending oil prices into the triple figures.

"If there is a war confronting Iran and Saudi Arabia, oil could overnight go to above $250, but decline [back] down to the $100 level," he said.

"If they attack each other's loading facilities, then we could see oil spike to over $500 and stay around there for some time depending on the extent of the damage."

Oil prices are typically sensitive to geopolitical developments in the Middle East, where the bulk of the world's oil is produced.

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