Israeli firm says costs too high on Iran strike

JERUSALEM (Reuters) - A leading Israeli investment firm said on Thursday any military strike on Iranian nuclear facilities would exact an economic price too high for the world to accept, and as a result, it would likely acquiesce to a nuclear Iran.

A sharp rise in the price of oil, the costs of war and the damage to global trade would be too great and deter world powers from taking any serious action, said Amir Kahanovich, chief economist at Clal Finance, one of Israel's largest brokerage houses.

The assessment differed sharply from Israel's official position that Tehran's nuclear aspirations are unacceptable and that all options are on the table in preventing a nuclear-armed Iran, which it views as a threat to its existence.

In a report "The Iranian Issue through Economic Eyes," Kahanovich laid out courses of action -- ranging from additional "light sanctions" to military strikes -- and told investors the world would likely balk at taking the steps needed to stop Iran from developing nuclear weapons.

Even for Israel the economic cost of a military confrontation that could include retaliatory missile attacks by Tehran and proxies in Gaza and Lebanon would be too high, Kahanovich wrote.

"Unfortunately, it appears that a nuclear Iran is the most reasonable scenario," he added.

Israel on Wednesday called on the world to stop Iran from developing nuclear weapons, after the U.N. nuclear watchdog said Tehran appeared to have worked on designing an atomic bomb and may still be conducting secret research.

Speculation about an attack on Iran was fueled last week when Israel, widely assumed to have the Middle East's only nuclear arsenal, test-launched a long-range missile and by comments by Prime Minister Benjamin Netanyahu that Tehran's nuclear program posed a "direct and heavy" threat.

Iran, which denies it wants nuclear weapons, said the International Atomic Energy Agency's (IAEA) findings were "unbalanced" and "politically motivated" and vowed to push ahead with its atomic program.

Kahanovich said even a threat of attack on Iran could take an economic toll by raising risk premiums in Israel.

If Iran were backed into a corner it could take action, such as blocking the Strait of Hormuz, causing the price of oil to jump above $250 a barrel, the report said.

And the burden of funding a military confrontation would be too great with so many countries already hurting in the world economic crisis, it added.

Asked about the likelihood of global consensus for tougher sanctions against Iran, Ephraim Kam, a researcher at Israel's Institute for National Security Studies, said China and Russia, which wield veto power in the U.N. Security Council, would not support such steps and risk economic fallout.

"The most we may see is another round of light sanctions," he said.

(editing by Rosalind Russell)