Oil price rises amid worries about Iran

Oil rose above $141 a barrel in Asia today as expectations of a weaker dollar spurred investors to seek refuge in dollar-denominated oil futures as a hedge against inflation.

“The main factors behind the rise today are the US dollar, which remains fragile, and geopolitical tensions, particularly surrounding Iran.” said David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney.

“That’s unsettling for the oil market.”

The European Central Bank may raise interest rates at its next meeting on Thursday, a move that would help strengthen the euro against the dollar, Moore said.

Worries about tight oil supplies and growing global demand are also major factors in the doubling of oil prices since last year, he said.

Traders were also digesting reported comments from the commander of Iran’s Revolutionary Guards, who warned that if his country is attacked, Tehran would strike back by barraging Israel with missiles.

In a report published on Saturday in the conservative Jam-e-Jam newspaper, Gen. Mohammad Ali Jafari said that if Iran were provoked, it would also control a key oil passageway in the Gulf. Iran is the world’s fourth-largest oil exporter.

The report comes after the disclosure of a recent Israeli military exercise over the Mediterranean Sea that was seen as sending a message to Iran to curb its nuclear ambitions.

Light, sweet crude for August delivery rose $1.60 to $141.81 a barrel in Asian electronic trading on the New York Mercantile Exchange, midday in Singapore.

On Friday, crude futures spiked to a record $142.99 a barrel in New York before closing at $140.21.

The dollar has also weakened on expectations the Federal Reserve Board won’t soon raise interest rates as the US economy struggles with low growth. The Fed left its benchmark rate unchanged last week.

The dollar dipped to 106.02 yen in Asian trading Monday, while the euro was little changed at $1.5792.

A falling US stock market has also led investors to seek higher-yielding investments such as oil and other commodities.

The Dow Jones industrial average has fallen to its lowest level in nearly two years – and is down nearly 20% since its peak in October.