Mark Shenk
Bloomberg
June 20, 2008

Crude oil rose as the weaker dollar enhanced the appeal of commodities as a currency hedge and the New York Times reported that Israel held a rehearsal for a potential bombing attack on nuclear targets in Iran.

Oil prices have almost doubled in the past year as investors sought refuge from a declining dollar, which fell again today after traders pared bets the Federal Reserve will raise interest rates on June 25. Iran, OPEC’s second-biggest oil producer, would respond to an Israeli attack with a “heavy blow,” a senior cleric said.

“The only way to increase the value of the dollar is by increasing interest rates, which doesn’t look likely,” said Nauman Barakat, a senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “The simulated attack of Iran by Israeli warplanes is certainly not going to reduce geopolitical tensions.”

In other markets, coffee jumped the most in nine months on reduced shipments from Brazil, the biggest grower. Cattle also climbed. The UBS Bloomberg Constant Maturity Commodity Index gained 18.63 to 1,655.50 after reaching a record 1,668.25.

Crude oil for July delivery rose $2.69, or 2 percent, to $134.62 a barrel on the New York Mercantile Exchange. Prices declined 24 cents this week. Futures climbed to a record $139.89 on June 16.

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