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Iran Blockade Could Send Oil Up 50%

But international forces would win the ensuing conflict

By Kevin Spak,  Newser Staff

Posted Jan 5, 2012 10:33 AM CST

(Newser) – If Iran ever really closed off the Strait of Hormuz—as it threatened to last week—oil prices could spike more than 50% in a matter of days, analysts tell the New York Times, with even a partial closure likely resulting in a $50-per-barrel increase. “You would get an international reaction that would not only be high, but irrationally high,” says the head of one energy think tank.

Iran’s military is definitely capable of blocking off the vital oil chokepoint. But it couldn’t hold Hormuz for very long, according to Peter Apps, Reuters’ political risk correspondent—the US and others would quickly launch a military strike to clear it. The blockade would also take a heavy toll on China, Iran’s top oil customer and one of its closest allies. “They are much more likely to threaten than to act,” concludes one national security professor.

Iranian military personnel place a national flag on a submarine during the 'Velayat-90' navy exercises in the Strait of Hormuz in southern Iran on January 3, 2012.
Iranian military personnel place a national flag on a submarine during the 'Velayat-90' navy exercises in the Strait of Hormuz in southern Iran on January 3, 2012.   (Getty Images)
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COMMENTS
Showing 3 of 43 comments
Bundy714
Jan 5, 2012 3:20 PM CST
Even with no closure at all (the most likely scenario), speculators will drive up prices on the "fear" of a blockade.   We don't need a disaster to drive up prices, just the fear of one.  That's what you get when speculators manipulate the market, rather than just plain ole supply and demand.
user99
Jan 5, 2012 2:15 PM CST
I'm hoping it hits $200 a barrel.
SC23
Jan 5, 2012 1:27 PM CST
It wont take Iran closing the straight. All it will take is for them to sink one or two tankers and they will get all the market reaction they need. Hell.. if they even detain one it would probably send prices up. The real issue here is why they are threatening this. Figure that out and you see a little more of the bigger picture.

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