Iran says oil could reach $500 on dollar and politics

TEHRAN (Reuters) - Iran's OPEC governor said world oil prices could reach as high as $500 (251 pounds) per barrel in a few years' time if the dollar falls further and political tension worsens, an Iranian weekly said.

"If the dollar's value continues to decrease and if the political crisis becomes worse, the oil price would reach up to $500," Mohammad Ali Khatibi told Shahrvand-e Emrooz in an interview published on Saturday.

He was asked about predictions that oil prices could reach up to $200 per barrel in the next two or three years.

Oil dropped $2 to a fresh seven-week low on Friday, extending a decline that has knocked more than $24 off crude in two weeks as high fuel prices continue to batter demand.

Crude prices reached an all-time peak of $147 earlier this month.

Khatibi also said oil exports from the whole Middle East region would be at risk if the Islamic state came under any military attack over its disputed nuclear programme.

"If there is another war in the region, it will not only be Iran's oil not reaching the market, but rather the oil of the whole region would be cut from the market," Khatibi said.

"In that case, we will not have a price rise. We will have a price explosion."

Around 40 percent of global oil shipments leave the Gulf through the Strait of Hormuz off Iran's southern coast and Tehran has threatened to impose controls on shipping there if it is attacked, and warned Gulf neighbors of reprisals if they took part.

The United States and Iran are at loggerheads over Tehran's disputed nuclear work. Washington says it wants a diplomatic solution to the row, but has not ruled out military action if that were to fail.

Tehran says its atomic activities are purely peaceful, aimed at generating electricity.

(Reporting by Zahra Hosseinian; Editing by David Christian-Edwards)