PARIS -- A U.S. war on Iraq could seriously damage the global economy and hurt oil prices at a time when markets are in turmoil and growth remains stubbornly sluggish, analysts have warned.

Economic experts say military intervention would further hit investor confidence already bruised by a series of scandals in the U.S. and the plunge of the global markets -- the only question is how hard the impact would be. "A large-scale attack on Iraq threatens to unleash a crisis of confidence among investors, who tend to turn their backs on the market during crises and wait for better days," said Jean-Francois Daguzan of France's Foundation for Strategic Research, which carries out studies for the government. "It's a worrying prospect for the markets."

Daguzan was speaking after a recent study by French bank BNP-Paribas warned that even a short military campaign similar to the 1990-91 Persian Gulf crisis would increase oil prices from $25 to $40 a barrel and cut world growth by 0.5 percent in the first year after intervention, followed by 0.3 percent in the second, AFP reported.

A longer conflict could double current oil prices to $50 a barrel, the bank warned, wiping out a full percentage point of growth in the first year, 0.5 percent in the second.

But Dazugan cautioned some of the more alarming predictions over oil prices may be overstated. "The impact of the Persian Gulf war was relatively modest because we were able to bypass Iraqi oil," he said. "These days, there are multiple production sources."

Most analysts agree, however, that a fresh crisis in the Persian Gulf would put a heavy brake on economic confidence, at a time when the global economy is already shaky.

Rene Desfossez of investment bank CDC Ixis said U.S. business leaders shared fears that any military intervention in Iraq given the added "geopolitical uncertainties" would strengthen a "widespread fall in consumer and investor confidence".

U.S. consumption dropped by 1.3 percent and investment in the United States fell 6.9 percent during the Persian Gulf war, according to the BNP-Paribas study.

The new predictions are bad news for European governments -- many of which are already struggling to keep their economic promises to voters -- and goes some way to explaining the increasingly vocal opposition from European leaders to another war on Iraq.

France, among others, is walking on a fiscal tight-rope, with the new government's 2003 budget founded on a 3 percent growth forecast that has already been called into question by the International Monetary Fund's own 2.6 percent prediction.

Philippe Marini, the French senator presenting the budget to the Upper House, said a U.S. military campaign would leave the government's economic forecasts "in tatters".