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Situation in Iran Escalates

The conflict over Iran’s ongoing nuclear program escalated yet again today. Reuters reports that the government in Iran threatened:

to stop the flow of oil through the Strait of Hormuz if foreign sanctions were imposed on its crude exports over its nuclear ambitions, a move that could trigger military conflict with economies dependent on Gulf oil.

This new threat is just the latest in a series of events that have steadily increased tension between the West and Iran over the past few months. The issue of Iran’s nuclear program was once again brought to the forefront by a November report from the IAEA [PDF], which suggested substantial progress was being made towards the completion of a nuclear weapon. This was compounded by events earlier this month, in which Iranian military forces captured a US drone that was flying in their airspace. The regime shows no signs of kidding around, going so far as to initiate war games, simulating what actions would need to be taken to cut off the Strait of Hormuz.

As a result, oil prices closed just above $101 a barrel today. Further escalation would almost certainly result in drastically higher oil prices.

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