Iranian officials on Monday claimed they had full control of the Persian Gulf and the Strait of Hormuz – an international waterway south of Iran that serves as a gateway for more than 40% of the world’s sea-traded oil.
“We can ensure the security of the Persian Gulf and there is no need for the presence of aliens like the US and the countries whose home is not here,” said General Alireza Tangsiri, head of the Iranian Navy.
Tangsiri’s claim follows previous threats from Iran to block all oil moving through the passage if the US halts Iran’s oil sales.
The Trump Administration has been clear with its intentions to reduce Iran’s oil exports to zero and to sanction countries that continue to purchase Iranian crude after November 4th.
In July, Iranian Supreme Leader Ayatollah Ali Khamenei suggested that if Iran is blocked from exporting oil then no Gulf country should export oil. In August, Iran began conducting large-scale “swarming” exercises in the strait that could potentially shut down the waterway if ever deployed.
On Monday night, Secretary of State Mike Pompeo made it clear that Iran does not control the strait:
“The Islamic Republic of Iran does not control the Strait of Hormuz,” tweeted Pompeo. “The Strait is an international waterway. The United States will continue to work with our partners to ensure freedom of navigation and free flow of commerce in international waterways.”
The US Navy, which maintains a fleet in the Persian Gulf to protect shipping routes, said it is ready to do whatever it takes to ensure freedom of navigation through the strait.
What Iran doesn’t seem to realize is that blocking the Strait of Hormuz is illegal by international treaty.
As outlined in the 1982 UN Convention on the Law of the Sea (which Iran signed), all ships have the right to pass through international straits. Countries adjacent to the strait are not allowed to deny passage to vessels or planes traveling through the area.
The United States is not a signatory to the 1982 Convention, thus Iran does not believe US ships are guaranteed right of passage through the strait. The US insists that right of passage through the Strait of Hormuz has become “common law.” Either way, the intentional blocking of the strait could incite armed hostilities in the Gulf and send oil prices skyrocketing.
In an interview earlier this month, four-star general and former National Security adviser Jim Jones said the Iranian Navy should be destroyed if they try to block the strait: “I personally would like to see, if they ever did something in the Strait of Hormuz, I would like to see their Navy disappear.”
Editor’s note: Iran does not have that capability to block the Strait of Hormuz for very long, and it would be a disasterous confrontation for their navy. I’m guessing this it bluster and bluff. But Trump don’t play…
For oil investors, this means a bit of a wild ride. A temporary interruption, would add volotility to the market, no matter our confidence that the U.S. Navy would fix it in short order.