An Iranian official on Wednesday threatened to block all oil exports from the Strait of Hormuz if the United States succeeds in its promise to halt crude sales from Tehran.
The Strait of Hormuz, which is located at the mouth of the Persian Gulf between Iran (to the north) and the UAE (to the south), is often cited as the most important oil chokepoint in the world. Up to 30% of all seaborne-traded crude oil moves through the Strait of Hormuz each year.
“Any hostile attempt by the US will be followed by an exorbitant cost for them,” said Esmail Kowsari, deputy commander of the Sarollah Revolutionary Guards.
The US military responded to Iran’s threats by confirming that American sailors and their allies are standing by to “ensure freedom of navigation.”
Iran’s frustration is a byproduct of President Trump’s May decision to pull out of the JCPOA (an agreement which lifted sanctions on Iran in exchange for curbs on its nuclear program) and to reimpose sanctions on Iran that will cripple its ability to export oil.
US sanctions on Iran will resume in November. In June, the Trump Administration threatened to impose sanctions on any nation that continues to import Iranian oil after November 4th and urged other producers to get ready to make up for the decrease in Iranian output.
Saudi Arabia says it has the capacity to produce an extra 2 million bpd to “ensure market balance and stability” and “to respond to any eventuality.”
Iranian President Hassan Rouhani blasted the US sanctions as “crime and aggression” and said it was “incorrect” to believe that Iran would ever stop exporting oil.
“The Americans say they want to reduce Iranian oil exports to zero,” said Rouhani. “It shows they have not thought about its consequences.” Iran, as OPEC’s second-largest producer, exported about 2.28 million bpd of crude in June.
This week, Rouhani told reporters that Tehran would remain in the nuclear deal without the United States if the remaining signatories can guarantee Iran’s benefits. Signatories plan to meet later this week to discuss ways of salvaging the agreement.
“Iran will survive this round of US sanctions as it has survived them before. This US government will not stay in office forever…But history will judge other nations based on what they do today.”
Editor’s note: This would be an act of war, and would quickly escalate. But I doubt it will come to this since Trump would love to mix it up, and Iran would completely lose control of its own destiny.
Oil would, of course, go through the roof, challenging our booming economy, but making the Russian and Venezuelan oil more valuable.