|Oil embargo against Iran may hurt UK insurers||
The oil embargo against Iran which comes into force on July 1 may be a blow to the UK insurance sector.
As soon as the oil embargo is imposed, Iran’s oil buyers will lose access to the London-based insurance market that protects 95% of the tanker shipments against oil spills or collisions.
Practically, this means that companies will not take the risk of multibillion-dollar liabilities arising from an uninsured incident, and the insurers will be deprived of fees stemming from the lucrative oil market.
At the end of January 2012, the EU approved a package of restrictive measures against Iran including a ban on import, purchase and transportation of oil and petroleum products from Iran, as well as a ban on related financial and insurance operations.
Asian countries such as China, India, Japan and South Korea have traditionally been the main consumers of Iranian oil. 10% of imports to China, India, South Korea and Japan came from Iran. Turkey was considered the most heavily dependent on Tehran which supplied 51% Ankara’s needs in oil.
Analysts do not expect any increase in oil prices due to sufficient emergency oil reserves in the developed countries, debt crisis concerns in the Euro zone, economic slowdown in the EU, and OPEC capacity to increase the output.
Moreover, markets are largely driven by expectations. The Iranian crude ban has been already priced in. However, price volatility is highly unlikely to disappear as risk of violent developments in Syria is still on the agenda.
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