Newspaper article International Herald Tribune

Oil Market Vulnerable If Iran Cuts off Gulf

Newspaper article International Herald Tribune

Oil Market Vulnerable If Iran Cuts off Gulf

Article excerpt

But despite rising tension with the West, Iran is unlikely to blockade the Strait of Hormuz, according to most Middle East political experts.

If Iran were to follow through with its threat to blockade the Strait of Hormuz, a vital route for almost one-fifth of the oil traded globally, the consequences would be immediate: Energy analysts say the price of oil would soar and could rise 50 percent or more within days.

An Iranian blockade by means of mining, airstrikes or sabotage is logistically well within Tehran's military capabilities. But despite rising tension with the West, including a tentative ban on European imports of Iranian oil announced Wednesday, Iran is unlikely to take such hostile action, according to most Middle East political experts.

American officials say the U.S. Navy's Fifth Fleet, based in nearby Bahrain, stands ready to defend the shipping route.

Iran's shaky economy relies on exporting at least two million barrels of oil a day through the strait, which is the only sea route from the Gulf.

A blockade would also punish China, Iran's most important oil customer and a major recipient of Gulf oil.

Despite such deterrents to armed confrontation, oil and foreign policy analysts say a miscalculation is possible.

"I fear we may be blundering toward a crisis nobody wants," said Helima Croft, senior geopolitical strategist at Barclays Capital. "There is a peril of engaging in brinksmanship from all sides."

Various Iranian officials in recent weeks have said they will blockade the strait, which is 21 miles, or 34 kilometers, wide at its narrowest point, if the United States and Europe impose a tight oil embargo on their country in an effort to thwart its development of nuclear weapons.

That did not stop President Barack Obama from signing legislation last weekend imposing sanctions against the Iranian Central Bank intended to make it more difficult for the country to sell its oil, nor did it dissuade the European Union from moving toward a ban on Iranian oil imports.

Energy analysts say even a partial blockage of the Strait of Hormuz could raise the world price of oil within days by $50 a barrel or more.

"You would get an international reaction that would not only be high, but irrationally high," said Lawrence J. Goldstein, a director of the Energy Policy Research Foundation.

Just the threat of such a development has helped keep oil prices above $100 a barrel in recent weeks. Oil prices were mixed Thursday after rising slightly Wednesday as the political tension intensified.

U.S. officials have warned Iran against violating international laws that protect commercial shipping in international waters, adding that the U.S. Navy would guarantee free sea traffic.

"If the Iranians chose to use their modest navy and anti-ship missiles to attack allied forces, they would see a probable swift devastation of their naval capability," said David L. …

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