FEARS of soaring fuel prices if there is war in the Middle East will have a depressing effect on residual values of nearly all vehicles, a pricing expert has warned.

But modern diesel cars will be least affected and residual values are described as strong in anticipation of such a situation, Plex Publishing claims. Editorial director John Coates said: 'A sustained spell of decent weather during the second half of January could see values of more saleable cars begin to harden as dealers start the annual stocking up process in anticipation of the early spring sales season.

'But any military action in the Middle East which results in higher fuel prices will almost inevitably have a depressing effect on residual values.'

However, Glass's Information Services maintains that a possible war with Iraq will have little effect on the market.

Managing editor Adrian Rushmore said: 'If the last war with Iraq is anything to go by, the effect on the market will hardly be discernible. The only thing that will be noticeable will be an increase in the viewing figures for the news. The basic thinking is that provided it is not going on in my back yard I have no need to worry.'

Coates said demand for diesel power was continuing to grow in popularity across all sectors except city cars and superminis.

He added that cracks were starting to appear in residual values for petrol versions of the new Mercedes-Benz S-class, even though it continues to dominate the prestige sector.

'More and more late examples are hitting the used market and almost twice as many potential buyers want the elusive CDI diesel as all the petrol models put together,' Coates said.

And on the resale values of family and traditional fleet cars, Coates said: 'These car values have hit a low point but some are showing signs of recovery. Citroen Xantia is holding, with drops for Fiat Marea, Toyota Avensis, new Ford Mondeo and Volvo S60 and 2%-3% drops for Honda Accord, new and old Renault Laguna, Volkswagen Passat and Vauxhall Vectra.'