Why Iran sanctions are pushing up oil prices
Christian Science Monitor / Ethan Bilby

"There is geopolitical risk after Western countries intensified pressure on Iran, cutting financial links and also putting sanctions on the oil industry," Commerzbank oil analyst Carsten Fritsch said. "This increases the risk of supply disruptions either directly from Iran or transported via the Strait of Hormuz, which carries one third of seaborne oil."

Investors fear oil prices could spike in the event of air strikes on Iran's nuclear sites, which could cut supply from OPEC's second largest crude producer and disrupt trade in the Strait of Hormuz, the world's most important oil transit channel.

"I don't expect at all to see Israel coming out with some action here at the end of the day; I read it more as a political play," said DNBNOR's Torbjrn Kjus.

He said the saber rattling was to get more Western countries to unite behind further sanctions.

The uncertainty has supported prices, under pressure from the worsening debt crisis in Europe and the United States that is expected to hurt economic growth.

Analysts expect that liquidity in the oil market will however dry up ahead of the long U.S. holiday weekend.

"Over the next two days the main input is likely to be Thanksgiving. Liquidity should gradually dry up as we go into a very long trading weekend," Petromatrix's Olivier Jakob said.

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