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Source: http://www.weeklystandard.com/articles/real-oil-shock_616149.html
An Iran with Nuclear Weapons Is the True Threat to the World Economy
(Weekly Standard) Michael Makovsky and Lawrence Goldstein - Consider first the potential consequences of a nuclear Iran. It could set off a proliferation cascade across the Middle East, with Saudi Arabia leading the way in acquiring nuclear capability. Iran would also be in a position to transfer nuclear materials to its terrorist allies. Further, Iran would seek to dominate the energy-rich Persian Gulf emirates and the Organization of Petroleum Exporting Countries (OPEC), threaten Israel's existence, destabilize moderate Arab regimes, subvert U.S. efforts in Iraq and Afghanistan, embolden radicals, violently oppose the Middle East peace process, and increase support for terrorism and proxy warfare across the region. All these potential consequences would heighten risks for the secure and sufficient supply of oil from the Persian Gulf, made worse by rising Iranian strength in OPEC and the need of major energy-importing countries, primarily in Asia, to deal delicately with Iran. The result would be a long-term rise in oil, gasoline, and heating fuel prices that would have serious negative implications for the fragile U.S. economy. Oil prices reflect many factors, including transit costs, current supply, projected future supply, and demand. Transit costs in turn include insurance premiums, which vary with the chance that vessels could be damaged or lost. The political risk to delivery is another factor; even without nuclear weapons Iran already has raised oil prices by threatening to close the Strait of Hormuz.