What Are The Costs Of Bombing Iran?04:24
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An Israeli war strike on Iran could lead to a wider regional war, with the U.S. drawn into the conflict, and leaving hundreds of Americans dead.

That's according to a classified war game that the American military held earlier this month, and reported on by the New York Times.

'Internal Look' Exercise

In the two-week mock scenario, called "Internal Look," the United States retaliates against Iran after an Iranian missile hits a warship in the Persian Gulf. Things spiral downward from there.

Bloomberg News reports that any conflict with Iran could have drastic consequences for the economy.

The price of oil is already up 9 percent this year, because of the instability in the Middle East. And Bloomberg found a conflict could push oil as high as $160 a barrel --- that's roughly $5 a gallon of gas.

But according to Bloomberg, the economic impact is directly related to the intensity of the conflict.

"A strike conducted by Israel, which has limited air power, might be over in a matter of hours. It would target the four main Iranian nuclear facilities the world knows about, but there’s no guarantee that Israel’s bombs would be able to penetrate Iran’s deepest underground sites."

A Jump In Oil Prices

Experts told Bloomberg that an Israeli strike would be followed by a token Iranian response, causing oil prices to jump $23 a barrel.

However, a U.S. military attack would likely last two weeks, and take out not just Iran's nuclear program, but also its air defenses.

Bloomberg found that could lead to a more severe Iranian response and much higher oil prices.

"A more protracted conflict, if it involved even a brief closure of the strait, might cause oil prices to spike by more than $60 a barrel. “It would be the biggest geopolitical disruption in the history of the global oil market,” Robert McNally [president of the energy consulting firm Rapidan Group] says. Ed Morse, global head of commodities research at Citigroup, estimates that if oil were to reach $150 a barrel, the U.S. would lose two percentage points in economic growth, enough to turn the nascent recovery into a recession."

A Gulf Nuclear Arms Race

However, no action could be even worse. If Iran is able to develop a nuclear weapons program (something it denies doing), there would be long-term costs to the United States.

“If we don’t have this confrontation now, but we end up with a nuclear Iran, we have to factor in the consequences of dealing with a nuclear arms race in the Gulf,” says Anthony Cordesman of the Center for Strategic and International Studies. At a minimum, the Pentagon would need to invest in new anti-missile technologies and maintain a sizable footprint in the region, just as it is winding down two wars there.

Guest:

  • Romesh Ratnesar, deputy editor of Bloomberg Businessweek

This segment aired on March 21, 2012.

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