This is not good for anyone. Tensions are rapidly escalating and we are now incredibly close to crossing the Rubicon in regards to the spiralling out of control situation in the Straight of Hormuz.
This dangerous game of chicken is no game at all, but is one that could upend the apple cart in regards to international trade and commerce, especially when it comes to the price of oil.
Iran is not backing down from the West, and the West is not backing down from Iran. The question is, who is going to blink first? If anyone does at all.
Earlier this month, the United Kingdom assisted its American allies, getting in on the conflict with Iran, seizing the oil tanker Grace 1 which was carrying approximately 2 million barrels of oil, off the coast of Gibraltar.
This oil was suspected to be going to Syria and was thus stopped by the Royal Navy at the request of the United States military.
This action infuriated Iran and they vowed to get revenge for these actions, of which they would in very short order.
Retaliation came last Friday, when the Iranian Revolutionary Guard boarded and seized two oil tankers, one that was registered in the United Kingdom and the other Liberia (however, UK operated).
The UK oil tanker, Stena
Fortunately, the government of Iran guarantees that the crew is safe and sound in their custody, which I have no doubt is the truth, as the ramifications of doing harm to the civilian crew would be drastic indeed.
The excuse being given by the Iranian Revolutionary Guard for seizing the UK owned oil tanker was first that it had infringed maritime regulations, then later that it had collided with an Iranian fishing vessel.
Meanwhile, the owners of the oil tanker state that this vessel was seized in international waters illegally after being surrounded by a number of small boats and helicopters, while breaking no international regulations.
Jeremy Hunt, the UK foreign secretary, stated the following;
What is most likely in this scenario is that Iran was simply following through on their threats and were taking an "eye for an eye", or rather in this scenario, an "oil tanker for an oil tanker".
This has been escalating for days and has grown more severe the longer the detained crews remain in custody, with people demanding that a resolution be reached.
Iran, however, is showing no signs of backing down and have continued to escalate their rhetoric, uttering a threat against the entire global economy when they stated they would "secure the Straight of Hormuz" if not allowed to access it for trade, a similar threat that they have made in the past.
Taking it one step further, Hossein Dehghan, the Islamic Republic's top military adviser rejected any possibility of new negotiations with the United States and said that Iran and its regional allies would target and attack all US bases in the area, if war action were taken.
As I have previously mentioned, when first covering the start of this conflict, this rapidly escalating crisis threatens all of global trade, as approximately 17.2 million barrels of oil per day flows through the Straight of Hormuz.
Oil is the lifeblood of commerce and is often called "black gold" for a good reason. It affects the price of everything.
War in the Straight of Hormuz would cause the price of oil to explode in price. If oil goes up in price, then so too does transportation, production and the cost of just about everything else. This one commodity is so interconnected with global commerce it is scary.
This situation, if it crosses over the Rubicon could spark one of the greatest economic crises of our lifetimes.
In this scenario, precious metals will explode higher in price, as they move in tangent with a higher price of oil and an increase in global geopolitical risk.
The United States, the United Kingdom, the World will not allow the Straight of Hormuz to be shut down and unfortunately, Iran cannot afford to be locked out of this vital shipping lane either.
Conflict looks assured, but there is still time for cooler heads to prevail. Let's hope the latter is the outcome we get, for the sake of global trade, for the sake of everyone.
- Source, As first seen on the Sprott Money Blog
Taking it one step further, Hossein Dehghan, the Islamic Republic's top military adviser rejected any possibility of new negotiations with the United States and said that Iran and its regional allies would target and attack all US bases in the area, if war action were taken.
As I have previously mentioned, when first covering the start of this conflict, this rapidly escalating crisis threatens all of global trade, as approximately 17.2 million barrels of oil per day flows through the Straight of Hormuz.
Oil is the lifeblood of commerce and is often called "black gold" for a good reason. It affects the price of everything.
War in the Straight of Hormuz would cause the price of oil to explode in price. If oil goes up in price, then so too does transportation, production and the cost of just about everything else. This one commodity is so interconnected with global commerce it is scary.
This situation, if it crosses over the Rubicon could spark one of the greatest economic crises of our lifetimes.
In this scenario, precious metals will explode higher in price, as they move in tangent with a higher price of oil and an increase in global geopolitical risk.
The United States, the United Kingdom, the World will not allow the Straight of Hormuz to be shut down and unfortunately, Iran cannot afford to be locked out of this vital shipping lane either.
- Source, As first seen on the Sprott Money Blog
