International crude oil prices rose to touch the highest price in recent times as Iran threatened to disrupt oil supply flowing through Persian gulf that supply as much as 20 percent of the world’s oil. Iran’s supreme leader Ayatollah Ali Khamenei threatened that any effort to destabilize Iran would trigger the possibility of the disruption of oil supply.



Iran on an average produces 3.85 million barrels oil per day. Further, it is strategically located along the Strait of Hormuz. This is the passage through which around 17 million barrels oil are exported to Europe and America.



Though the U.S. has downplayed this threat, saying Iran is dependent on oil revenue and it cannot afford to disrupt the oil supply. However, if the extreme measures are taken from either side the supply disruption is imminent. Moreover, in this condition of war, due to disruption oil prices may be shot up to $250 per barrel.



In the case of crisis or war, the U.S. not only has to tackle Iran but may face squeezed supply from another quarter of the globe as well. Venezuelan President is already relentlessly advocating a cut in oil production and trading in euro in place of dollar. At present, it does not seem to have any ground, OPEC already announced to maintain its production level, but in case of war, U.S. should be ready to meet any eventuality.



In this probable situation, U.S. will not have much room for maneuver and diplomacy, and it will be difficult to sustain an offensive, which will be definitely linger on for a considerable time.



Strategically, Iran is for sure playing a tough ball. The world is already running in a very tight supply-demand balance and if Iran would take any step towards this, the entire market would jeopardize. Crisis goes even further, summers are the peak seasons in U.S. for oil and gas consumption and any disruption in prices or supply would aggravate the crisis in U.S. itself.





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