Iran Threatens Strait of Hormuz Shutdown, Gold & Silver React With Upside
In the wake of European oil embargo on Iran, Tehran has renewed prospects of closing the strategic Strait of Hormuz, the vital oil shipping route. The move is considered a bluff more so than a serious threat at the current juncture. This has sent gold and silver up on the last day of trading before the July 4th holiday.
“If we completely go under the sanctions, we will not let a single oil drop pass through the Hormuz Strait,” Arsala Fathipour, head of the Iranian parliament’s economic commission, told the semiofficial Iranian Students News Agency.
The Strait of Hormuz is an oil-way for a sixth of the world’s oil production, including crude extracted from Saudi Arabia. The U.S. Navy would view any impediment of the passageway as an act of war. Mainstream pundits and other analysts dismiss Iran’s threats to close down the strait as political oratory. Nevertheless, the US has strategically moved “significant military reinforcements” into the Persian Gulf.
US forces will also soon increase the number of fighter jets capable of striking deep Iran as a standoff over its nuclear program escalates.
“When the president says there are other options on the table beyond negotiations, he means it,” said one senior administration official. Navy ships hold the most presence in the region, according to the New York Times.
“The message to Iran is, ‘Don’t even think about it,’” one senior Defense Department official warned. “Don’t even think about closing the strait. We’ll clear the mines. Don’t even think about sending your fast boats out to harass our vessels or commercial shipping. We’ll put them on the bottom of the gulf.”
The news is bullish for the metals if unfortunate for humanity. The United States still acts with fervor towards war with Iran, and this morning’s news sent oil higher, nearly $4.
The commodities complex can expect to gain from any major outbreak of war, as happened the day the United States was attacked on 9/11. The world economies are merely to precarious for precious metals to wear major geopolitical outbreaks without movements to the upside. Here is a chart for September 2011, when gold was below $300 an ounce: