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Fresh Threats from Iran

After the US Navy removed an air craft carrier from the Persian Gulf, the Iranian military warned Washington not to redeploy it to the area. This news comes in the midst ongoing war games in the Strait of Hormuz, accompanied by tests of new land-to-water cruise missiles.

Despite this, the US military remains unfazed. An official statement from the Pentagon today stated: “These are regularly scheduled movements in accordance with our longstanding commitments to the security and stability of the region and in support of ongoing operations.”

The escalating tensions in Iran have led directly to higher oil prices in the past several days. The Financial Times notes that “the latest comments from Tehran sent Brent crude, the global benchmark, 3.5 per cent higher to $111.35 for the first time in three weeks.”

Again, to stress the importance of the Strait of Hormuz:

The Strait of Hormuz is a narrow channel which is the conduit for 17m barrels a day of oil. The US Department of Energy describes the strait as “the world’s most important oil chokepoint”, with an average of 14 supertankers passing through it every day, most of them heading towards Japan, South Korea, India and China.

Analysts believe that Iran would not be able to shut it down completely. But even a brief closure of the strait would have a dramatic impact on oil prices, traders believe, predicting a rise towards $150 a barrel – or beyond, if the disruption is prolonged.

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