What does it take to reignite a rally in oil? Nine missiles.

Crude oil futures surged on world markets after Iran announced that it had test fired nine long- and medium-range missiles. Among them was a Shahab-3, which is said to have a range of 1,250 miles and is capable of hitting Israel.

The tests came just a day after the Iranian president appeared to play down the threats to Israel and the United States over the stanadoff on Iran's nuclear program and oil prices fell in dollar terms by the biggest amount since 1991.

But the saber-rattling today revived worries about a disruption to Mideast oil.

"While we're still in a phase of verbal attacks, the danger of military strikes is real and Iran might halt its oil exports,''  Gerrit Zambo, a trader at BayernLB in Munich, told Bloomberg News. "This is driving the oil price up and the situation remains tense.''

Crude oil futures slid 6 percent on Monday and Tuesday on expectations that the global economy will slow and ultimately cut back on demand. The retreat gave rise to the view that oil's climb may have peaked. Americans have cut back on their driving and air travel, and India and China have reduced government subsidies on oil imports.

Yet such optimism may be misplaced. For one, the decline in oil came after the dollar gained in value, which has more to do with European interest rates than anything else. Oil is priced in dollars, so the decline was not as keenly felt by global consumers and investors.

And oil has a geopolitical element that has little to do with the market dynamics of supply and demand.

Higher oil is in the political interests of Iran, which produces more than 4 million barrels per day, nearly 5 percent of the world's oil supply. The Economist recently noted, "The tightness of the oil market has become, in effect, a line of defense for Iran, letting its radical leadership hint, truthfully, that any hostile act that may impede the flow of Iranian oil would risk a global economic decline."