Strait of Hormuz: U.S. Should Be Ready for the Next Oil Crisis
Tensions are rising in the Strait of Hormuz. Iran has recently yet again threatened to close the strategic strait down over the threats from the European Union to impose an embargo on buying Iranian oil. The Europeans want to do that as a part of increasing efforts by the West to halt Tehran’s nuclear program.
If Tehran blockades the strait, through which 40 percent of world’s oil is shipped, such an action would have a major impact on the prices of oil and the world economy. Iran has used its oil revenues to export the Islamic revolution and to fund an extensive nuclear weapons program. Yet Iran’s energy sector is also its greatest vulnerability, particularly its need to import gasoline in order to meet its domestic demand.
Iran’s reaction is also a response to the U.S. and European increase of pressure on Iran’s oil and financial sectors. According to a 2007 Heritage Foundation report, a week-long blockade of the strait would result in a 230 percent jump in the price of oil. Historically, that would have been from $65 to $150 per barrel of West Texas Intermediate crude in 2007 prices and from $100 to $230 in today’s prices.