"In this extreme case, however, the spike would not last very long, probably not more than one quarter, probably less," said Michael Wittner, global head of oil research at Societe Generale.
The more probable scenario is an "extended de facto sectarian civil war" in Iraq lasting one or two years creating "intermittent and moderate" supply disruptions of up to 500,000 barrels a day, argues Wittner, a former CIA official.
To date, Sunni militants have not yet built the military capability to push their advance south to threaten the strategically-critical oil fields which contain almost three-quarters of Iraq's reserves.
This partly explains why Brent crude has eased recently from nine-and-half-month highs. The benchmark – which is used to price more than half the world's crude – is set to extend declines this week, according to CNBC's latest sentiment survey of strategists and traders. Forty-three percent of respondents, or 10 out of 23, say prices will fall this trading week. Brent slipped more than 1.3 percent last week, its steepest weekly fall since March.
"The bulk of supply comes from the South (80 percent) and the Kurdish-controlled north (12 percent), which is not yet at risk from ISIS's advances," said UBS commodity strategists Dominic Schnider and Giovanni Staunovo, in comments emailed to CNBC. "Since we believe that ISIS is not strong enough to move into these oil producing areas, Iraqi oil supply should largely be stable."
Oil markets appear to be "gradually pricing out the fear premium associated with Iraq again," Commerzbank analysts said in research note last week.
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Nevertheless, 35 percent (8 out of 23) of respondents in the CNBC survey say the Iraq conflict can yet threaten supply security, sending prices higher. "The pot should continue to boil, with surprises still to the upside," said Chris Mennis, president of broker New Wave Energy LLC.
SocGen's Wittner didn't rule out the risk of attacks by Sunni militants using "unconventional" tactics including car or truck bomb attacks and sabotage. Such disruptions of up to half a million barrels a day could push Brent crude $10 higher to the $120-125 range, he added.
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