An effective world-wide refusal to buy Iranian oil would cost Iran dearly. The Iranians would not be the only ones to bear the cost. "Prices could soar past $100 a barrel, experts say, if the U.N. Security Council authorizes trade sanctions against the Middle Eastern nation, which the West accuses of trying to make nuclear bombs, and Iran curbs oil exports in retaliation. A sharp global economic slowdown could follow." "Iran Sanctions Could Drive Oil Past $100" by Brad Foss and George Jahn. Sunday January 22, 6:39 pm ET http://biz.yahoo.com/ap/060122/iran_nuclear_the_oil_weapon.html?.v=4 The effect on gasoline and heating oil prices is self-evident. There's another less obvious financial impact to consider. Many large financial institutions build their asset portfolios with borrowed money. They call that "leverage" in the banking and investment world. The indebtedness is typically collateralized with a lien on the asset itself. The extent to which a firm leverages its balance sheet depends on the degree of confidence it has in its estimate of future business conditions and the aggressiveness - or foolhardiness as the case may be - of its management. If a big increase in oil prices reduced the fair market value of equities (or debt securities as well) by impairing profits, such could have an adverse impact on the balance sheets of "leveraged" investors. "Leverage" is exhilarating on the way up. As the value per share rises, net worth goes up. The more shares, the greater the increase in net worth. The decision to go into debt to acquire those assets appears vindicated. It's the reverse on the way down. The more heavily "leveraged" the balance sheet, the more quickly the firm heads for bankruptcy. To people who have no acquaintance with the financial world this sounds more complicated than it actually is. I'm speaking of simple primary school arithmetic. If the value of a firm's assets declines, but its indebtedness remains the same, the balance is struck by a reduction in owners' equity. Once the owners' equity is all used up, the firm's net value goes to zero. If the value of the assets then continues to decline, liabilities exceed assets. One firm's liabilities are another firm's assets. For example, if you own Delphi Corporation bonds those are a liability for Delphi but an asset for you. When the collectability of one firm's liabilities comes into question, such may cause other firms to become insolvent because of the ensuing reduction in value of the asset values of these other firms. There could come a point at which enough large firms go bankrupt to pull down enough of their creditors in a sort of financial equivalent of a nuclear chain reaction. Economists refer to this as "cascading cross-defaults" or "systemic risk." A cost as ubiquitous as the cost of energy cannot be increased without limit without extremely unpleasant consequences under any economic arrangement. But a highly leveraged economy embodying a series of implicit multi-billion dollar bets that the price of oil won't crack the triple digit level is more susceptible than an economy with only modest debts. I am skeptical about the extent to which the past investing decisions of the big banks, hedge funds, pension funds and mutual funds embody an accurate appraisal of the effect of hundred dollar a barrel oil on financial asset prices. I would not care to learn the breaking point, in dollars per barrel, the hard way.