USand British military forces are prepared to intervene if Tehran shuts theStrait of Hormuz, the nations’ defence secretaries told reporters in WashingtonWednesday.
Leon Panetta and Philip Hammond addressedthe threat during a press conference at the Pentagon in an attempt to calmfears that stem from Iran’s reaction to heightened international sanctions and theEU’s recent implementation of a ban on Iranian oil imports.
“The Iranians need to understand thatthe United States and the international community are going to hold themdirectly responsible for any disruption of shipping in that region -- by Iranor, for that matter, by its surrogates,” Panetta said.
“The United States is fully prepared for all contingencies here. We’veinvested in capabilities to ensure that the Iranian attempt to close downshipping in the Gulf is something that we are going to be able to defeat ifthey make that decision to do that.”
Hammond praised Panetta’s decision tosend the USS John C Stennis Carrier Strike Group to the Persion Gulf, callingthe move a “powerful signal”, and said regional British military assets willwork closely with the US to defend the waterway in the event of a closure.
While the USDepartment of Defense claims 25% of the world’s oil passes through the StraitsDonald Bogden, a researcher at Stamford, Connecticut-based brokerage MJLF, saysthe waterway handles roughly 40% of water borne crude.
In a report that precededthe implementation of the EU ban, Bogden said the only event that could spark aclosure would be an Israeli strike on Iran’s nuclear sites but stressed bothscenarios are extremely unlikely as they would be tantamount to a declarationof war.
If Tehran were totemporarily close the Strait, the analyst believes a war risk premium on crudewould likely send prices soaring above $200 per barrel despite the steadyrelease of stockpiles held by the IEA with disruptions in global refiningprompting an increase in product imports.
“Product tankermarkets would benefit,” he continued, adding: “For the crude tanker fleet MJLFexpects the effect would be mixed. Historically, tanker markets benefit from conflictsin the Arab Gulf and we expect history to repeat itself in the case of aclosure.
“A significantinsurance war risk premium would be tied to spot market voyages for owners withtonnage in the Arab Gulf willing to risk transiting the Straits benefitting thetanker rate structure, particularly VLCCs.”
Bogden doesn’t believeIran could keep the Straits shut for a sustained period of more than two weeksdue to military intervention led by adversaries in both the Middle East andabroad and expects that supply/demand fundamentals would quickly return iftrade lanes were reopened.
