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Iran premium in oil prices set to fall

The high cost of oil reflects hopes of a strong recovery in demand at least as much as fears of a military conflict between the West and Iran. However, the price of a barrel of Brent probably still includes a premium of $5-10 for the possibility of more significant disruption to supplies from the Middle East. We expect this premium to fall over the coming months, adding to the downward pressure on oil prices from waning optimism about the global recovery.

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