Reports suggest Iran is gearing up to execute mining activities in the strategic Strait of Hormuz. This potential action could inevitably cause a sharp escalation in worldwide oil prices. This would financially impact many nations but may also unexpectedly benefit Russia and its ongoing military operations in Ukraine. In a report surfaced on July 1 by Reuters, it was stated that Iran had embarked on the process of loading naval mines onto boats within the Persian Gulf, as per sources within U.S. officials.
These sources identified Israeli offensive actions against Iran on June 13 as the origin of these preparations. Israel’s clashing with Iran developed into a fragile ceasefire, leaving the situation with Iran still tense. This increased friction has led to repeated Iranian threats to obstruct the Strait of Hormuz as a defensive tactic. The significance of such a blockade would resonate on a global scale, with the Strait serving as a vehicular passageway for a significant portion of global oil needs.
Inhibiting the flow through the Strait would introduce a bottleneck to approximately a fifth of global oil requirements, thereby causing a sudden upward pressure on global energy prices. This could inadvertently benefit the Russian financial system, which heavily relies on revenues from oil exports. Before the invasion, oil and gas revenues from the energy sector constituted nearly 35-40% of Russia’s budget revenues.
However, the recent imposition of Western-led sanctions on Russia’s energy exports, balance with the G7 enforced price maximum of $60 per barrel for Russian oil, has severely undermined its economic prosperity. As a result, Russia’s economic losses over the past three years have exceeded $150 billion. The escalated activity between Israel and Iran also momentarily boosted oil prices.
The international standard, Brent crude oil, saw a significant increase on June 13, rising from $69.36 to $75 per barrel. This pronounced surge in price seemed to offer a temporary financial relief for the Russian economy. Meanwhile, Europe was in the process of formulating its 18th round of sanctions aimed against Russia’s energy sector, concurrently with the G7’s efforts to establish a $45 per barrel price ceiling.
However, the proposed sanctions package was stalled due to resistance from Hungary and Slovakia. The stormy situation regarding oil prices eventually stabilised, coinciding with the calming of the conflict. As a consequence, Brent crude oil prices on July 2 returned to a softer figure of $67.50 per barrel.
Looking ahead, if Iran decides to proceed with its strategic mining operation in the Strait of Hormuz, a substantial part of global oil demand would be blocked leading to an upswing in oil prices. This action seems drastic as Iran would, in the process, block its own oil exports, suggesting that such a move would only be contemplated in extreme circumstances.
Interestingly, this situation has potential repercussions for Ukraine, which is currently battling Russian-instigated unrest. Ukraine’s newly-developed interceptor Unmanned Aerial Vehicles (UAVs) have begun disrupting Russia’s advanced long-range drones.
Russian drones have been persistently attacking Ukraine, causing progressively worrisome destruction in urban areas each night. Amid this growing turmoil, with traditional air defense inventories beginning to dwindle, the Ukrainian government is relying increasingly on these newly manufactured UAVs.
In conclusion, Iran’s possible strategy to mine the Strait of Hormuz may trigger various significant global consequences. It will cause oil price surges globally but may paradoxically provide economic relief to Russia. However, its impacts remain hypothetical until Iran takes definitive action in this regard.
The post Prospective Iranian Mining Disruption May Impact Global Oil appeared first on Real News Now.
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