As the U.S., and possibly the European Union as well, seek to tighten sanctions on Iran to discourage the country from pursuing nuclear weapons, Tehran has responded by threatening to cut off all oil from passing through the Strait of Hormuz—where the country has just begun 10 days of naval operations. Markets, however, paid little attention and Brent crude actually snapped a six-day increase as the country’s threats were largely dismissed as rhetoric.
In a New York Times report, Iran’s first vice president, Mohammad-Reza Rahimi, said the country would strike back against any tighter sanctions by blocking all oil shipments through the strait, through which approximately a fifth of the world’s oil supply passes on its way to customers around the world. His threats are seen as fear that expanded sanctions contained in legislation about to be signed by President Barack Obama will have a severe effect on the country.
Apparently the threat of sanctions is a matter of concern to the Iranian leadership, since the Iranian currency is falling against the dollar and there are rumors of bank runs. Even though Iran is the third largest exporter of energy, it already is facing tough economic times.
Through Iran’s official news agency, Rahimi said, “If they impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz.” Whether that threat can be carried out remains to be seen, since the U.S. has plans in place to prevent a cutoff of oil transport.