Estimates of the amount that the tensions between the West and Iran have added to global oil prices range from $5 to $25 per barrel (pb). Our best guess is towards the bottom of this range – perhaps $10 – which explains around half the $20 increase in the cost of Brent since December. The other $10 mainly reflects growing optimism about the prospects for the global economy. Whatever the precise split, though, oil prices are likely to fall as fears over Iran ease and the economic recovery disappoints.
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