War in Iran 'would dent world economy'

A LEADING economist said today that the City should be taking far more notice of a potential US attack on Iran, claiming any action will have a bigger effect on the global economy than the Iraq war.

Mark Cliffe of investment bank ING said the risk of the US military crossing into Iran "can no longer be dismissed" as President Bush steps up his campaign to defeat terrorism.

Cliffe claims that even if market responses in the build-up to the Iraq conflict are repeated, oil could surge to nearly $65 a barrel-slicing almost 1% off global economic growth in the first year.

More than 1,400 points could go from the Dow Jones on Wall Street while the euro may gain 13% against the US dollar. A shock attack on Iran's nuclear facilities would prompt an even sharper reaction.

Cliffe said: 'People are discounting the possibility of an attack given what has happened in Iraq but, if you go back less than three years, that is what people were saying about Iraq. If it happens in the next year, which is quite possible, it is something we need to start considering now.'

Brent crude fell 54c today to $45.90 a barrel, which analysts put down to light profit-taking. Opec ministers meet in Vienna this weekend to discuss production.

Iran pumps around 4m barrels of oil a day and Shell has operations in the Islamic state. BP chief executive Lord Browne said this week that to do business with Iran would be 'offensive' to the US.