Rising tensions between Israel and Iran, over  Tehran’s nuclear development programme, could drive oil prices over $130 a  barrel next year says Goldman Sachs’s chief economist in Moscow at a time when  the consensus forecast is for a price decline to $80-$90 because of slowing  global growth and the euro crisis.

“Goldman Sachs is bullish on oil, but it will driven by a one-off, not rising  demand, by a tightening embargo on Iran that will take more and more oil out of  the market,” says Clemens Grafe, Goldman Sachs’ managing director of new market  economics in an interview with bne.

Separately, Robert McNally, the former chief energy advisor on US President  George W. Bush’s National Security Council, and past advisor to Republican  presidential candidate Mitt Romney, sees a “dangerous divergence” between market  players and policymakers with regard to the risks of a conflict between Israel  and Iran.

McNally says the markets appear to assign only a 5 per cent probability to an  exclusion in the conflict whereas policymakers, “are more like 50-50 right  now.”

Commodity traders complacency is due to the fact that Tehran has walked over  so many previous lines drawn in the sand by Israel and American with impunity,  says McNally.

“I’ve made my living looking for these divergences between market  participants and policymakers,” McNally said in an interview with Renaissance  Insights, a publication of Renaissance Capital, the Moscow-based investment  bank. “I cannot remember a time in my 20-year career when the gap between Planet  Market and Planet Officialdom was so wide.”

Iranian nuclear programme is rapidly approaching a crunch point after which  it will disappear into hardened underground bunkers that would be impervious to  Israeli missiles, says McNally.

“At some point over the coming months, Israel either must strike or depend on  the U.S. to live up to its own pledge not to allow Iran to weaponise its nuclear  programme,” says McNally.

Clemens and McNally are talking about two very different scenarios: one a  slow-moving internationally-coordinated embargo and the other the outbreak of  war. However, both are assuming tensions between Israel and Iran can only  increase over the coming months and drive prices of oil up.

Clemens concedes there is still plenty the west can do to prevent a spike in  oil prices. “This doesn’t mean the oil price will be $130 even if the problems  escalate. There could be an offset if strategic reserves are released in the  west or if there is progress in talks and the embargo is not tightened,” says  Clemens. “If oil remains over $120 then global growth will slow and this price  can’t be maintained.”

Oil producers would not welcome yet more volatility in the market. Typically  oil prices spike at the outbreak of hostilities, before falling back if US  forces get involved.

Higher oil prices would benefit emerging markets like Russia, Venezuela and  Nigeria in the short-term, but if they stay high for any length of time this  will exacerbate the global economic recession that will eventually hit oil  demand and the capital flows on which emerging markets still depend.

Despite Brent crude standing at around $110 a barrel the deepening recession  in Europe has already seen Russia’s economy slow sharply, growing by only 2.8  per cent in annualised terms in August, against a relatively robust 4.4 per cent  over the first half of this year.