LONDON (Thomson Financial) - Tropical Cyclone Gonu could still cause oil prices to soar, analysts have warned, as shipping through the Strait of Hormuz may face giant waves according to US military predictions as they tackle the world's most important transport route.

Oil prices rose on Monday on the emergence of Cyclone Gonu but subsided on Tuesday as fears about the impact of the tropical storm eased.

However, the US military's Joint Typhoon Warning Center have predicted waves of up to 36 feet as the storm heads for the shipping lanes that over 25 pct of global oil supply passes through.

"You don't want to navigate in that weather if you can help it, waves of that height will definitely cause shipping delays," cautioned Conrad Gerber, a tanker tracking analyst with Petrologistics.

"The Strait is only 10 km across and very busy. Tankers might be held up for 24 hours, which the market could absorb, but if the storm causes a sea accident or damages loading platforms we're likely to see a large rise in prices," added Gerber.

Most oil and gas exports from the Gulf region, amounting to between 17 and 20 million barrels a day, pass through the strait between Oman and Iran.

Market players are worried the storm may tighten global crude supply further, adding to fears stoked by Nigerian output being reduced by around 30 pct as militants target oil companies in the Niger Delta Region.

"Anything that delays oil production or transportation is going to affect prices," said Andy Henderson, a trader with CMC Markets. "OPEC cannot afford to have many more cuts with the situation in Nigeria already creating a tight crude market".

Cyclone Gonu, the strongest tropical storm to hit the Middle East in decades, lashed Oman with heavy rains and winds on Wednesday, as thousands were evacuated from low-lying areas there and in Iran.

Oil and gas exports have been suspended in Oman and the key United Arab Emirate's shipping fuel centre has halted operations, according to reports.

The Joint Typhoon Warning Center predicts the storm will continue north west towards the strait over the coming days.

Analysts say some ships are still sailing through the strait despite reports of swells of four to six feet high and high winds.

"We understand that crude oil shipments are continuing through the Straits of Hormuz, with ships being diverted or delayed as they can," said Dennis Gartman, the editor of The Gartman Letter trading note. d.sheppard@thomson.com ds1/cp/cp/ejp

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