Iran keeps world guessing on Hormuz oil disruption

London: Iran is unlikely to disrupt oil shipments through the Strait of Hormuz in the Gulf in any conflict with the West over its nuclear ambitions, but the risk remains, reinforced by Tehran's bellicose rhetoric.

Any military interference in the strategic channel at the entrance to the Gulf could double oil prices in days and deal a blow to the world economy, maritime and security experts say.

Attacks on merchant shipping in the international waterway, which shares Iran's coastline, would disrupt exports from Opec's biggest producers and knock the booming economies of Gulf states.

The waterway, just 55km across at its narrowest point, is a thoroughfare for 33 per cent of the world's seaborne crude oil exports, according to Lloyd's Marine Intelligence Unit (LMIU), citing 2006 figures.

The oil flow, which fluctuates with Opec production, is closer to 40 per cent when it includes carriage of petroleum products and is calculated as a percentage of globally traded oil.

Defence, trade and maritime experts, who gathered at a Royal United Services Institute (RUSI) conference on the strait's security in London late last week, said any attempt to impede passage would reverberate around the world.

Psychological impact

"The psychological impact of a perceived threat to the strait alone is great - even the suggestion of a restriction stokes oil prices," RUSI Director Michael Clarke told the conference.

Closure to merchant shipping or attacks on oil tankers going through the passage would kick oil prices, above $90 (about Dh330) a barrel and near all-time records, higher still.

Many oil analysts reckon prices could easily double until it reopened. Risk and credit agency Standard and Poor's says prices could rocket to $250 a barrel on any blockage.

But analysts say the probability of Iran attempting to block the strait is low - even the US military says there is a slim chance of it happening.

"Iran is by far the most dependent for exports of its hydrocarbons through the strait. So there is a striking illogic in this," said Richard Schofield, an expert in international boundaries at King's College in London.

Iran has explicitly threatened to close the strait before, during the Iran-Iraq war from 1980-1988, when the West and especially the United States began backing Iraq.

During the conflict Iran and Iraq attacked merchant shipping in the Gulf, including those of neutral nations. Dubbed the 'Tanker War' it is a reminder of what could happen, experts say.

"More than 500 ships were attacked with over 400 civilians killed. Iranian oil exports were cut by 50 per cent," said Mark Hankey of LMIU.

The impact on Gulf economies of a military exchange in or close to the strait would be disastrous, and Japan, South Korea and the United States' oil supplies would be hit hardest.

Knock out exports

According to LMIU, closure would knock out 88 per cent of Saudi Arabia's seaborne crude exports, all of the supply from the UAE, Kuwait and Qatar, almost all of Iraq's and 90 per cent of Iran's crude shipments.

Japan, which sources 26 per cent of its crude oil through the passage, would suffer most, according to LMIU, the shipments meet 85 per cent of its oil needs.