March 21 (Bloomberg) -- Crude oil would soar above $100 a barrel in the event of a U.S. or Israeli attack against Iran, former Saudi oil minister Sheikh Ahmad Zaki Yamani said today.

``If America or Israel attack Iran, and I assume Iran reacts, the price of oil will go to three digits, and you know what this means for the world economy,'' Yamani told reporters at a conference in London today. ``It's a very horrible thought.''

Yamani, who was minister between 1962 and 1986 and now chairman of the London-based Centre for Global Energy Studies, gave no indication as to whether he thought a conflict with Iran was likely.

``If you think logically, this should not happen. But sometimes things happen against logic, like the invasion of Iraq, and see what is happening now,'' he said.

He said Saudi Arabia doesn't want to see oil slip below $40 a barrel and that OPEC favors crude closer to $60.

Crude oil for May delivery rose 27 cents, or 0.5 percent, to $59.52 a barrel at 2:26 p.m. on the New York Mercantile Exchange. Crude traded at $60.68 in London.

The U.S. and other countries say Iran is trying to develop nuclear weapons. Iran denies this and says its nuclear program is for producing electricity.

The 12-nation Organization of Petroleum Exporting Countries agreed at a meeting in Vienna last week to maintain current production targets, after lowering them at two previous conferences late last year.

Major Power

``The high price of oil is good for the treasuries of OPEC countries for the time being, but later on they will have to pay a price for it and it will have an impact on the world economy and demand,'' Yamani said. High prices are ``encouraging alternative sources of energy, conservation and exploration in other areas,'' which is ``what happened in the late 1970s,'' he added.

The U.S.-led invasion of Iraq four years ago made Iran the biggest military force in the region, counterbalanced by U.S. forces, Yamani said.

``Iran will not really accept to not be recognized as the major power in the area,'' he said. ``They will not be satisfied unless they are recognized as `the' power.''

Nuclear research ``could be another card to negotiate with,'' he said. ``If our friends in Washington start some under-the-table negotiations with Iran, probably the nuclear problem can be forgotten.''

Tim Congdon, founder of Lombard Street Research and an adviser to the U.K. Chancellor of the Exchequer between 1992 and 1997, said talk of an Iranian-led hegemony in the Middle East was a ``lot of nonsense,'' arguing that the Iranian economy was ``a pygmy'' when compared with other nations.

``It is Saudi Arabia that has faster economic growth and has kept the supply of oil going, that's the country that matters to us,'' Congdon said.

To contact the reporter on this story: Stephen Voss in London at sev@bloomberg.net

Last Updated: March 21, 2007 14:31 EDT