The sight of massive oil fields aflame is a recurring nightmare for many Kuwaitis and a memory they find hard to forget.

To prevent another economic and environmental disaster in a showdown with Iraqi leader Saddam Hussein, Kuwait is closing oil wells along the Iraqi border and guarding oil refineries and fields with Patriot missiles.

"If I told you we are not worried I'd be lying. There is a chance they will send scuds," said Mohammed Al-Sager, a Kuwaiti member of parliament.

Off the shores of this small nation along the Persian Gulf, coalition destroyers are also on patrol, boarding suspicious boats that might be considered a terrorist threat.

"Saddam has a history and his history is damaging," said Kuwaiti oil analyst Kamel Al-Harami. "He poisons his own people. You can't put prediction on him."

It's precisely that uncertainty that has oil markets nervous, despite assurances OPEC can offset any loss in production caused by a war with Iraq.

"If there is any shortfall, all the OPEC ministers said they would increase production straight away," said Nader Sultan, the CEO of Kuwait Petroleum Co.

Precisely how that will happen is not yet clear. Saudi Arabia is the only OPEC nation with excess capacity, roughly 2 million barrels a day, just enough to cover losses in Iraqi output.

But with Venezuela, a key non-Arab OPEC member, still operating well below capacity, analysts say the margins are razor-thin. That leaves the world market unprepared for any disruption in Kuwait, according to experts.

"We are cautious, but we are alarmed," said Al-Harami.

That may explain why Kuwait on Wednesday allowed a group of international reporters to tour its most secure oil facilities. Soldiers were on high alert and the fields were operating quietly, pumping millions of gallons per day onto tankers protected by an armada of warships against Iraq and Al Qaeda terrorists vowing to retaliate against the West.

"We in Kuwait are guarded," said Al-Harami. "I think the threat is minimal."

While Iraq could lob a rocket into Kuwait, analysts fear a chemical weapon more than conventional warhead hitting a refinery. Oil speculators have also assumed the worst, sending prices once again towards $40 a barrel.

It didn't help Tuesday when Ahmed al-Arbeed, the chairman of Kuwait Oil Co., said the state was shutting down its western oil fields, cutting national production by a third. But the government on Wednesday issued a clarification, saying the executive did not speak for the state, and assured markets Kuwait could uphold production quotas.

William La Jeunesse joined FOX News Channel (FNC) in March 1998 and currently serves as a Los Angeles-based correspondent.