In response to the escalating tensions between Iran and the U.S., some Iranian officials have threatened to close the Strait of Hormuz. So, will this affect the Iran Oil Prices? It’s not the first time the country has made the threat; it happened in December 2011.
Very few think Iran would actually try to close the Strait, though it might take steps to slow the traffic. Too many countries depend on the oil that passes through it, and Iran needs allies, not more enemies.
However, just the threat used to cause an economic shock and rising oil prices in most developed economies. For example, the last time Iran threatened to close the Strait average gasoline prices topped out at nearly $4.00 a gallon in early 2012.
That hasn’t happened this time. While U.S. average gasoline prices are up 50 cents or 60 cents a gallon for the year, they’re still well under $3.00 a gallon in most places (except California).
Part of that rise is a result of Saudi Arabia and the Organization of Petroleum Exporting Countries (OPEC) cutting back oil production in an effort to increase the price of oil. In addition, U.S. refineries are shifting to their “summer blend” of gasoline, which slows production and costs more, putting upward pressure on prices.
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