Iran now says it will disrupt oil supplies through the Strait of Hormuz if any military action is taken against its country.
The price per barrel has soared on this likely threat.
Iran had relucted to make this threat till now. It now is facing signs of escalating military preparations, the latest being the US joint chief of staff meeting with Israeli military officials.
The threat is largely just a threat because any attempted disruption in the strait will result in significant reduction of its military capability, something it wants to maintain in anticipation of US withdrawal from Iraq.
Iran has no intention of disrupting its oil revenue at over $100/bl, and threatening a disruption just increases the risk premium, making the mullahs that much richer and maximizes the value of its reserves toward the inevitable compression of the price and destruction of the value of substitution (the competition).
The threat of war is actually minimal. The stakes are too high for all parties. The risk premium, however, will be deliberately supported with threatening rhetoric and military demonstrations.
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