High oil prices have replaced Greece as the chief threat to the world's fragile economic recovery, an HSBC report finds.
Fears of a Greek default and ensuing financial implosion in Europe have threatened global recovery, but spikes in already high oil prices will be even worse.
Tensions between the West with Iran over Tehran's nuclear ambitions have sparked major fears that saber rattling will escalate into conflict and threaten supply.
"Has Iran developed a nuclear capability, will there be a war with Israel or, indeed, the U.S., and, in a bizarre self-defeating act of retaliation, would Iran be tempted to seal the Straits of Hormuz?" HSBC Chief Economist Stephen King writes in a report, according to CNBC.
Iran has threatened to close the Strait of Hormuz, a narrow waterway vital for oil tankers, to protest sanctions.
Worries are growing that Israel is mulling military strikes on Iran with or without the blessings of the United States.
Loose monetary policies in the United States and Europe have helped push prices up as well. Prices will stay high due to rising demand in the developed world anyway, but Middle East unrest could send prices skyrocketing.
Economists agree that high gasoline prices, which average $3.77 a gallon nationwide, threaten the U.S. economy.
"I don't think for a minute consumer confidence levels can be sustained in the face of sustained high gas prices," says Bernard Baumohl, head of the Economic Outlook Group, a Princeton, N.J., research firm, according to CNNMoney.