Oil prices would soar as much as 50 percent in a matter of days if Iran made good on threats to close the Strait of Hormuz, officials say.
Iran has threatened to block off the passage and conduct military drills to protest sanctions slapped on the country by the West for allegedly trying to develop a nuclear program.
The U.S. has said its Navy is ready to keep the passage open, and Iran has warned the U.S. to back off.
Such saber rattling has sent U.S. oil prices above $103 a barrel.
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While closing the Strait benefits nobody, including Iran (it needs to export its oil and import gasoline and other derivatives because it has little refining capacity), the chances for an ugly incident and extended chest pounding are on the rise.
|(Associated Press photo)
"I fear we may be blundering toward a crisis nobody wants," says Helima Croft, senior geopolitical strategist at Barclays Capital, according to the New York Times.
"There is a peril of engaging in brinksmanship from all sides."
Closing the strait would not only irk the U.S. and Asian importers, but Arab exporters as well, possibly even sparking a military conflict, other experts say.
"Should the Iranians try and close the strait, you'll see war between Arabia and Persia at that point. In a worst-case scenario, there really is no limit on how high oil prices would go and therefore how high consumers would be paying at the pump," commodities research analyst and trader Stephen Schork told Newsmax.TV recently.
"It will make the last economic contraction of 2008 look like the good times."
According to the U.S. Energy Information Administration, flows through the Strait in 2011 came to roughly 35percent of all seaborne traded oil, or almost 20 percent of oil traded worldwide.
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