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  • a furt firOil rises to the highest level since November 2014 ahead of Iran sanctions.
  • High prices could hurt Asia’s emerging markets, force central banks to implement contractionary monetary policy

There is no stopping the oil freight train.

Brent oil jumped to $83.12 a few minutes before press time – the highest level since November 2014   – on fears that Saudi Arabia and other major producers may not have enough spare capacity to compensate for the drop in Iranian oil supplies.

The US sanctions on Iran’s oil sector are set to take effect from November 4.

Further, China’s Sinopec is reportedly halving loadings of crude oil from Iran this month, which indicates that Beijing is bending to Washington’s demand. If the Chinese refiners to do comply fully with the US demands, then the oil market would tighten even more, leading to a bigger jump in prices.  

It is worth noting that likes of Vitol are already calling $100 in oil.  

However, the sharp rise in prices could prove costly for the oil-dependent emerging economies in Asia. Further, the resulting high inflation could force the Fed to push up interest rates above the neutral level. So, it seems safe to say that a further rise in oil prices could hurt the global economy.