Gary Sick, who served on the National Security Council under Ford, Carter and Reagan, writes at CNN.com that an attack on Iran would have a huge and negative effect on the world economy by sending oil prices through the roof.
Of more general significance, the markets would realize that some two million barrels a day of Iranian oil were now removed from the world market for an indeterminate period of time, and the price of oil would jump. The head of the IMF has suggested that an immediate increase of 20% to 30% could be expected.
But that could be just the beginning. It is not hard to imagine that, in the days following the attack, there would suddenly be unexplained pipeline explosions in Iraq, possibly by pro-Iranian militias, which might remove another million barrels per day from the market.
The Baku-Tbilisi-Ceyhan (BTC) pipeline from the Caspian Sea to the Mediterranean might also be attacked.
Moreover, one might expect disruptions in oil delivery and loading in Arab ports up and down the Gulf, some because of sabotage but others from cyberattacks on the control systems. Iran would attribute these to “the hand of God,” but the more pragmatic effect would be a very substantial portion of the world’s oil suddenly removed from world supply.
If sustained over more than a few weeks, the scramble to replace large volumes of Persian Gulf and Caspian oil would drive up the price of oil, and gasoline, to unprecedented heights.
That would constitute a huge tax on the world’s economies, just at the moment when they were showing signs of recovery from the Great Recession. Extremely vulnerable economies, such as the southern European states, could be tipped into bankruptcy, but all states would face significant challenges as a surge in transportation and manufacturing costs rippled through all aspects of their industries. This is Iran’s true weapon of mass destruction.
And at a time when the world is just barely beginning to overcome the last global recession, it could easily turn into a major and long-lasting depression.