Iran responds to sanctions with threat to block transit of Gulf oil

By Richard Cochrane, MENA analyst, IHS Global Insight

More than one-third of the world's oil shipments — some 15 million barrels per day — pass through the narrow Strait of Hormuz, which has a maximum width of 30 miles (50 kilometres).

Because the sea lanes narrow to just two miles at points, ships traversing the Strait are forced to pass through Iranian territorial waters. The Iranian military began a 10-day military exercise in the eastern part of the Strait on Saturday December 24, with ships and aeroplanes dropping mines in a show of strength as the United States and Europe consider imposing further sanctions on Iran's oil and financial sectors.

Iran last attempted to disrupt Gulf shipping during its war with Iraq in the 1980s, when it mined shipping lanes in an attempt to cut off funding for Iraq's war effort. Any renewed attempt to block the Strait is likely to involve a combination of mines, small patrol boats, and submarines, as Iran lacks the military capacity to enforce a blockade using conventional means.

Iran blockading the Strait of Hormuz would have serious implications for global oil prices, and the markets have remained jittery over the possibility. Nonetheless, such action would also damage Iran's economy, and risk retaliation from the US and allies that could further escalate instability in the region. Accordingly, it is not likely to be a decision that the Iranian leadership will take lightly.