International energy traders on Sunday braced for disruptions as Iran’s parliament endorsed the closure of the Strait of Hormuz, a crucial chokepoint for the world’s oil supply - with the ultimate decision resting with the country’s leadership, according to reports in Iranian state media on Sunday.
Any move to impede the flow of shipping traffic out of the Persian Gulf would likely lead to a spike in oil prices - and higher prices at the gas pump. But how high they will go and for how long is an open question that depends largely on what happens around the Strait of Hormuz. About 20 percent of the world’s oil and natural gas shipments pass through the narrow stretch of water between Iran to the north and Oman to the south.
Secretary of State Marco Rubio told Fox News on Sunday that it would be “economic suicide” and a “terrible mistake” for Iran to disrupt movement through the strait. He urged China, which depends heavily on oil and gas from the region, to pressure Iran to avoid that move.
“It would be, I think, a massive escalation that would merit a response, not just by us, but by others,” Rubio said.
After the U.S. bombing of three of Iran’s nuclear facilities Saturday, Iran’s Foreign Minister Abbas Araghchi said on Sunday there would be “everlasting consequences” for an attack that he called “extremely dangerous, lawless and criminal behavior.”
It remains unclear whether Iran will attempt such a blockade or use mines or missiles to interrupt the flow of commerce through the region.
Before the United States bombed Iran, analysts were already warning that a closure of the strait could push oil prices well past $100 per barrel. That would be more than a 30 percent increase from where they stand today. Such a change could quickly push the average price of a gallon of regular gasoline, now $3.22 according to AAA, toward $4.
Analysts caution, however, that Iran is unlikely to deliver on the threatand note that the nation has vowed to close the strait in the past and never successfully done so.