OPEC's chief Tuesday said that an escalation between Iran and the West could hurt both the world economy and oil investments, his strongest warning to date over a standoff that is rattling oil markets.

Abdalla Salem el-Badri said the tensions, which include a phased European oil embargo, were pushing high prices higher and, while he wouldn't predict possible oil prices as the situation plays out, he said much higher prices would take their toll.

"If the price will go to $150 a barrel, yes of course, it will hurt the world economy," el-Badri, who is secretary general of the Organization of Petroleum Exporting Countries, told Dow Jones Newswires.

Oil markets have been roiled in recent weeks by an Iranian threat to close the Strait of Hormuz , as the West ratchets up pressure with new sanctions including a European Union oil embargo. The International Monetary Fund warned last week that the measures--if they lead to significant Iranian oil disruptions--would take the price of the U.K. 's benchmark Brent crude to above $140 a barrel. Tuesday, Brent was trading at around $112 a barrel.

El-Badri said the Iranian escalation had the potential to be "the perfect storm" for oil markets.

"There will be a lot of volatility and not for the benefit of anybody," he said, as traders speculate on supply concerns. "The market [will also] look at less spare capacity."

Saudi Arabia --OPEC's main swing producer--has vowed to make up for any shortfall tied to the crisis.

Tensions with Iran have kept oil prices in Europe well above $100 a barrel, a boon for oil producers who need higher revenue following disruptions relating to Arab uprisings last year.

But el-Badri said he doesn't want OPEC members to generate income because of conflict.

"Volatility is bad for investment," he said. "If there is conflict we really cannot invest, there will be clouds all over the investment projects."

OPEC, which badly fractured mid-2011 amid a spat between Iranians and Saudis, has vowed however to stand apart from the tensions.

"We aim to isolate OPEC and concentrate as an economic organization," el-Badri said. "Nobody got in touch with me" either from Iran or Western countries, he said.

El-Badri also wouldn't take sides on whether the International Energy Agency should release emergency stockpiles, or on an Iranian proposal to stop European oil exports, calling them "sovereign rights."

El-Badri also wouldn't directly comment on whether Western sanctions were to blame for the economic risk tied to the Iranian escalation.

"I am not going to advise them [Western countries]," he said. "They know the consequences."

However, he expressed optimism the tensions would be resolved.

"My feeling is...there will be no attack on Iran , there will be no closure of the Strait of Hormuz ," he said. "At the end of the day, wisdom will prevail and everything will go back to normal."

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