The New York Times has reported that Iran has threatened to block all oil shipments through the Strait of Hormuz, which serves as a transport corridor for approximately 1/5 of world oil supply. The threat is in response to U.S. sanctions on Iran that are awaiting President Obama’s signature.
The sanctions, if enforced, would penalize foreign businesses for doing business with Iran’s national bank, which is responsible for collecting payment on much of the country’s energy exports. The sanctions are in response to a November IAEA report, and are intended to penalize Iran for pursuing secretly nuclear weapons in spite of international objections. Critics of the sanctions have argued that they would significantly curtail Iranian oil exports, driving up global oil prices and harming American consumers and allies.
The U.S. Navy has responded to Iran’s warning, saying that it “will not tolerate any disruption of naval traffic through the Strait of Hormuz.”
Will these sanctions be harmful or beneficial to US interests? What impacts might closing the Strait of Hormuz have on the economy?