Iran warned the U.S. on July 3 that it could close the Strait of Hormuz, a critical choke point for global oil trade, separating the Persian Gulf from the Gulf of Oman, after Washington threatened to halt Iranian oil exports.
The Strait of Hormuz has been identified as the world's biggest oil transit chokepoint for six successive years, according to the U.S. Energy Information Administration (EIA). The strait had 18.5 million barrels per day (mbpd) of oil transported through it in 2016.
Meanwhile, the world's biggest oil exporter, Saudi Arabia, suspended crude oil transfers through the strategic Bab-El-Mandeb Strait on July 25 after two of its oil tankers were allegedly attacked by Iranian-backed Houthi rebels off Yemen’s coast. On Aug. 4, Saudi Arabia resumed oil shipments through the strait, while it warned that it will continue to 'monitor the situation and remain ready to take necessary actions' in efforts to constantly ensure the safety and reliability of its oil exports.
The Bab-El-Mandeb Strait between the Horn of Africa and the Middle East, which links the Mediterranean Sea via the Suez Canal and Red Sea to the Indian Ocean, was the fourth biggest transfer strait with 4.8 mbpd of oil transit in 2016, according to the EIA.
The international benchmark Brent crude traded at $73.75 per barrel on July 25 when Saudi Arabia announced the suspension. Following the announcement, Brent crude gradually increased and traded at $74.93 per barrel on July 31, showing a 1.6 percent increase.
Jean-François Seznec, an expert from the Middle East Institute, told Anadolu Agency Tuesday that Iran's threat to block the Strait is more of a signal of the Iranian leadership's tough stance directed in particular at the Iranian public and more generally at the world at large.
"I think the Iranians are trying to pass the message to the world that they could block Hormuz even more easily than they are doing now with the Houthis in Bab-El-Mandeb," he said.
"However, should Iran block Hormuz, it would immediately escalate the U.S.' presence and most probably a strong and devastating military intervention against Iran by the U.S.-French-Saudi-United Arab Emirates, and perhaps the Chinese as they would suffer the most from the blockage," he said.
One day after the alleged Houthis' attack on Saudi oil tankers, Qassem Soleimani, head of Iran’s elite Quds Force, said the Red Sea was “no longer safe” for U.S. naval forces.
Seznec said the Iranian public is fully aware of the risks, but he argued that few are actually worried about the blockage of Hormuz, despite their annoyance of the Iranian leadership's warning over Bab-El-Mandeb.
Perhaps the leadership's signal is more for the Iranian public showing they can be tough, he explained.
- Bab-El-Mandeb attack targets U.S. and Europe
Seznec said although the temporary suspension of Saudi oil transportation across the Bab-El-Mandeb Strait would have an effect on regional transit, he said it would not be an enormous impact as alternative transfer routes are available.
"Saudi Arabia can export about 5 mbpd of crude through the pipeline from Abqaiq to Yanbu on the Red Sea North of Jeddah. Thus, they could fill tankers in Yanbu for Europe without having to go through Bab-El-Mandeb," he said.
The Yanbu terminal on the Red Sea is one of Saudi Arabia's three primary oil export terminals, where almost 25 percent of the country's oil is exported.
The Saud suspension of shipments is as much political as security-based, Seznec contended, adding that he believes it is meant to push the U.S., Europe, and indirectly China to become more involved in curbing Iran and its support of the Houthis.
"Bab-El-Mandeb sees the passage of about 5 mbpd of Gulf oil. Rerouting the shipments around Africa will increase costs, at least until Saudi Arabia decides to export through Yanbu," he concluded.
-Tension escalating between U.S. and Iran
Tension between Washington and Tehran mounted since May, when the U.S. withdrew from a 2015 nuclear deal signed between Iran and the P5+1 group of nations - the five permanent UN Security Council members plus Germany.
The 2015 agreement placed strict restrictions on Iran’s nuclear program in exchange for billions of dollars in sanctions relief.
On July 2, the U.S. State Department announced its intention to reduce Iranian oil revenue to zero. The following day, Rouhani warned that if the U.S. impeded Iran’s oil exports, those of the region’s other oil producers would suffer a similar fate.
The first round of the U.S. pre-nuclear deal sanctions on Iran, largely targeting the country’s banking sector, went into effect on Aug. 7.
Iran's Minister of Labor and Social Affairs Ali Rabiei said that around 1 million Iranians may lose their jobs due to the sanctions.
The second wave of sanctions is set to take effect on Nov. 5, targeting Iran's port operators, petroleum-related transactions, and Iran's shipping sector and central bank.
(Anadolu Agency)