It’s anyone’s guess how Iran’s nuclear ambitions will play out in the financial markets. Surely, though, it’s an issue that can no longer be treated as a nonevent, which many investors are recklessly doing, some Wall Streeters say.

We’re now at the confrontation stage, following Saturday’s vote by the U.N. atomic energy agency to report Iran’s nuclear activities to the Security Council. In response, a belligerent Iran announced it would end nuclear cooperation with the agency and begin full-scale production of enriched uranium, which can be used to produce electricity or help build a nuclear bomb.

In an interview with UPI about three months before the events of September 11, 2001, Lee Kuan Yew, the Asian political sage, remarked that “the biggest threat on the horizon is an Islamist bomb, and mark my words, it will travel.”

Some Wall Street sources with top Israeli government contacts are being told basically the same thing: There is no way Israel will permit nuclear facilities, with the implicit threat of a nuclear bomb, to exist in Iran. In other words, barring Iran’s willingness to scrap its nuclear-enrichment facilities, an Israeli strike is a virtual certainty.

One veteran investment adviser, Charles Allmon, editor of the monthly newsletter Growth Stock Outlook, addressed the Iranian danger in a recent issue. He warned his subscribers: “For the first time in decades, what is happening in foreign lands may influence the American financial markets more than domestic developments.”

Iran understandably figures prominently in such thinking, given it’s the world’s fourth-largest oil exporter, providing 5% of the world’s needs. Iran already has threatened to withhold oil if any U.N. sanctions are imposed because of its nuclear development program.

Fred Dickson, chief investment strategist at D.A. Davidson & Company, regional brokerage based in Great Falls, Mont., said the Iranian issue is increasingly popping up on institutional radar screens. “Right now, it’s a high stakes game of global chicken; Europe needs Iranian oil, and Iran needs the revenues,” he said. Iran is currently a nuisance but not a major crisis, he said, although Iran could climb to the top of the worry list if sanctions are imposed.

Mr. Dickson’s best guess is that a solution will likely be found, but if it’s not and sanctions are imposed he sees an immediate 2% to 3% decline in global markets.

Money manager Leonard Mohr of Los Angeles-based MCR Associates is among those who disagree. He thinks Mr. Dickson’s scenario is too optimistic, venturing the belief that sanctions would likely cause the price of oil to climb to a record $75-$80 a barrel from its current mid-$60s. In turn, he said he believes such an event would probably “nuke the market” and send the Dow, which closed Friday at 10,793, skidding to the low 10,000s.

Standard & Poor’s also sees dire consequences arising from the Iranian turmoil, because economic sanctions against Iran would have to include an embargo on oil exports. With oil prices near record levels, any loss of Iranian supply would send prices higher and badly damage global economic growth, S&P says.

Even more dangerous, in S&P’s opinion, is that the coalition of Western nations would seem to have few options to force Iran to back away from its nuclear research. If the coalition should stand by its earlier declarations that it will not allow Iran to develop a nuclear weapon, a military conflict could become unavoidable, S&P says.

For argument’s sake, let’s say there is an embargo. The obvious question, then, is which companies would benefit, as certain firms always do in chaotic periods. One clear beneficiary, according to S&P, would be energy companies that have oil production outside of risky areas like Iran. In this context, it favors such names as British Petroleum, ChevronTexaco, ConocoPhilips, Anadarko Petroleum, and Kerr-McGee. All rank in the top 10 of both American oil and natural gas production.

A rapid escalation of tensions, it’s thought, would also benefit shares of defense companies, as an escalation would lead to speculation of a military conflict. The defense beneficiaries are likely to include such American contractors as Lockheed Martin, Boeing, Raytheon, General Dynamics, Halliburton, United Technologies, L-3 Communications, and Computer Sciences.

Dandordan@aol.com