Wednesday, July 9, 2008

Iran fires missle tests, possibly escalating tensions with Israel and jeopardizing oil exports from entire region

Iran ran up to nine tests of a long range missile capable of reaching Israel yesterday, multiple media reports say. General Hossein Salami of the Revolutionary Guard reportedly said, “Our finger is on the trigger.” The missiles included the “Shahab-3” and several other designs.

Crude oil had dropped $9 over the past two sessions but had risen slightly Wednesday morning by about 60 cents, to $136.44. 40% of world oil exports pass through the Straits of Hormuz (including those from Saudi Arabia). The tests were conducted from a launch pad geographically near the Straits.

Armed conflict between Israel and Iran would almost certainly lead to blockade of the Strait and enormous runnup of oil prices further, following the spirit of the CNN report “We Were Warned: Out of Gas.”

Coincidentally, there was a shootout near a U.S. consulate in Istanbul, Turkey, that a US ambassador has called an act of terrorism. Turkey attracts attention as a much more moderate and democratic Islamic country, possibly a model for the rest of the Islamic world. However, the Kurdish minority and the possibility that it could split off with Kurds in northern Iraq could create tensions. Much of the recent hit independent film “Edge of Heaven” was filmed on the streets of Istanbul.

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