One of the obvious dangers of a possible war with Iran over its controversial nuclear program is that it could push oil prices sharply higher and, in turn, send the global economy into a tailspin. But a number of developments, some very deliberately set in motion by Iran’s adversaries, have recently converged to erode the effectiveness of Iran’s powerful oil weapon.
The sharp edge of Iran’s oil power has been dulled through painstaking tactical moves by Washington and its allies, but the most significant change came not by design, but by misfortune. Ironically, the fear that a conflict with Iran would cause a spike in petroleum prices and trip the world into a new recessionary spiral has been blunted by evidence that major economies are already suffering an economic slowdown. The sovereign debt crisis in the eurozone and the unexpected slowdown in growth in the U.S. have helped depress the price of oil in the commodities markets to well below $100 a barrel, the lowest level in eight months.
Lower oil prices are bad news for Iran for two reasons. First, they slash the Islamic Republic’s principal source of income. Second, they make the cost of conflict with Iran more bearable for the West.