Wednesday, December 28, 2011

Oil prices watching the escalation by the US and Iran in the Straits of Hormuz

Oil prices are down more than $1 this morning in trading due to the strengthening US dollar, but are still over $100 per barrel.  Traders however, are watching very closely to a growing escalation between the US Navy and Iranian sabre rattling that threatens to close the Straits of Hormuz, and potentiall skyrocket oil prices.

A senior Iranian official on Tuesday delivered a sharp threat in response to economic sanctions being readied by the United States, saying his country would retaliate against any crackdown by blocking all oil shipments through the Strait of Hormuz, a vital artery for transporting about one-fifth of the world’s oil supply.
The declaration by Iran’s first vice president, Mohammad-Reza Rahimi, came as President Obama prepares to sign legislation that, if fully implemented, could substantially reduce Iran’s oil revenue in a bid to deter it from pursuing a nuclear weapons program. - NY Times

From Reuters:

"The free flow of goods and services through the Strait of Hormuz is vital to regional and global prosperity," a spokesperson for the Bahrain-based fleet said in a written response to queries from Reuters about the possibility of Iran trying to close the waterway.
 "Anyone who threatens to disrupt freedom of navigation in an international strait is clearly outside the community of nations; any disruption will not be tolerated."
Asked whether it was taking specific measures in response to the threat to close the Strait, the fleet said it "maintains a robust presence in the region to deter or counter destabilizing activities", without providing further detail.

Already, the end of 2011 and the beginning of 2012 is shaping up to be a time of chaos and fear as each side is preparing for an inevitable confrontation over oil, nuclear power, and the right of the West to control events and national policies in a sovereign state.


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