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In response to a European Union embargo on Iranian oil scheduled to into effect in July, Iran has threatened to unilaterally cut off its oil exports to six European nations. But while many observers see the move as a toothless bluff aimed at pushing oil prices upward, the prospect of uncertainty could prove disastrous for fragile European and global economies.聽

Despite an onslaught of bad economic news in Europe that is reducing global oil demand, prices spiked for a few hours Wednesday to their highest level in more than six months after Iranian state media erroneously published that crude supplies had already been cut to Italy, Spain, Greece, Portugal, France, and The Netherlands.

Prices dropped soon after the Iranian government clarified that it had simply notified diplomats of those European countries that it was setting new 鈥� and unacceptable, in European eyes 鈥� conditions to continue selling them oil, including disregarding the embargo that EU countries agreed to in January.

鈥淚t doesn鈥檛 make sense,鈥� says Harry Tchilinguirian, senior oil market analyst in BNP Parisbas, a French bank.聽鈥淭hey are going to stop selling oil to countries that agreed not to buy. It鈥檚 the same thing.鈥�

But the market鈥檚 reaction illustrates the risks involved in the US and European decision to strain Iran's economy with an oil embargo over its current nuclear program, analysts say. Iran stands to lose less at this juncture because there are others willing to buy its oil and it can still deliver a big punch through oil prices.

Iran is demanding that EU countries relinquish the contractual right to stop payments in case of "cause major" like a war, asking for additional payment guarantees, and eliminating short-term oil supply contracts, Spanish Foreign Minister Jos茅 Manuel Garc铆a Margallo said in audio statement released Thursday by the ministry. He didn鈥檛 offer details.

Spain said that it has already secured alternative supplies, mainly from Saudi Arabia and Iraq, echoing similar calls for calm throughout Europe.聽

鈥淚f they were to cut it off earlier, we would accommodate quicker, that's what we'd do,鈥� EU Trade Commissioner Karel De Gucht said Wednesday in Hong Kong after a trip to Beijing.

The market will adjust

Furthermore, from a technical point of view, in the unlikely event Iran actually decided to cut supplies unilaterally, it would take it as much as two months to implement 鈥� and even then, only if it had alternative buyers lined up.

Timing is critical, Mr.聽Tchilinguirian says.聽"In effect you have a window of one or even two months before it would hit oil supplies.鈥�

Besides, Iranian imports 鈥渟houldn鈥檛 be so hard to be replaced.鈥� The only country 鈥渢hat would be effectively hit is Greece because it imports between a third and half from Iran at terms no other supplies could match.鈥�

EU Energy Commissioner聽G眉nther Oettinger聽said in Brussels officials are considering alternatives to allow Greece to secure oil supplies at market rates.

The EU has been gradually cutting back on Iranian supplies for some time, but it still bought a quarter of Iran鈥檚 exports of 2.5 million barrels per day between January and October 2011, according to the International Energy Agency. Spain, Italy, and Greece account for three-quarters of that.

Meanwhile, Asian economies have been buying more. China buys 22 percent of Iran鈥檚 exports, India 12 percent, and most of the remainder is exported to Turkey, Japan, and South Korea, close EU and US allies.

'We can mess with you'

EU officials have said the embargo, while economically painful, is necessary to pressure Iran into foregoing nuclear enrichment. But not all agree.

鈥淭his embargo was introduced without any thought to the consequences. [EU leaders] clearly didn鈥檛 bother to talk to energy experts about this,鈥澛爏ays Paul Stevens, senior research fellow in energy at London-based Chatham House and an expert on oil markets. The commission should explain聽鈥渨ho came up this 鈥� idea because it was a very stupid decision.鈥�

鈥淚f Iranians decide to do this, Europe聽would cope with a lot of difficulty. We won鈥檛 know until it happens,鈥� Dr. Stevens says.

And he is not sure it is a toothless threat. 鈥淚鈥檇 be surprised if this is a bluff," he says. "They could easily sell the oil to China instead. And it makes sense that they would聽[unilaterally cut supplies to Europe]聽because it would push prices up. They are saying 鈥榊ou wanna mess with us, we can mess with you and probably do more damage.鈥� 鈥�

Still, most doubt Iran would cut supplies unannounced, and oil prices brushed off any immediate supply disruptions. In fact, while Iran announced what it described as significant advances in its nuclear program and threatened oil supply cuts, it also said it was ready to negotiate with the EU and US.

鈥淚ran鈥檚 role in the sanctions regime is to offset potential losses from decreased sales to Europe, so it wouldn鈥檛 be surprising to have more saber-rattling that allows prices to rise,鈥� Mr.聽Tchilinguirian says.聽 鈥淎ny geopolitical tension involving Iran will prompt market reactions based on the headlines. We are going to get more of these, rather than fewer.鈥�