US Fifth Fleet says won't allow Hormuz disruption (2)

SANCTIONS

Tension has increased between Iran and the West after EU foreign ministers decided three weeks ago to tighten sanctions on the world's No 5 crude exporter, but left open the idea of an embargo on Iranian oil.

The West accuses Iran of seeking a nuclear bomb; Tehran says its nuclear programme is for peaceful purposes only.

The Iranian threat pushed up international oil prices on Tuesday although they slipped back on Wednesday in thin trade.

"The threat by Iran to close the Strait of Hormuz supported the oil market yesterday, but the effect is fading today as it will probably be empty threats as they cannot stop the flow for a longer period due to the amount of US hardware in the area," said Thorbjoern bak Jensen, an oil analyst with Global Risk Management.

The Strait of Hormuz is "the world's most important oil chokepoint", according to the US Department of Energy. About 40 percent of all traded oil leaves the Gulf region through the strategic waterway.

The State Department said there was an "element of bluster" in the threat, but underscored that the United States, whose warships patrol in the area, would support the free flow of oil.

France urged Iran on Wednesday to adhere to international law that allows all ships freedom of transit in the Strait.

Iran's international isolation over its defiant nuclear stance is hurting the country's oil-dependent economy, but Iranian officials have shown no sign of willingness to compromise.

Iran dismisses the impact of sanctions, saying trade and other measures imposed since the 1979 Islamic revolution toppled the US-backed shah have made the country stronger.

During a public speech in Iran's western province of Ilam on Wednesday, President Mahmoud Ahmadinejad implied Tehran had no intention of changing course.

"We will not yield to pressure to abandon our rights ... The Iranian nation will not withdraw from its right (to nuclear technology) even one iota because of the pressures," said Ahmadinejad, whose firm nuclear stance has stoked many ordinary Iranians' sense of national dignity.

Some Iranian oil officials have admitted that foreign sanctions were hurting the key energy sector that was in desperate need of foreign investment.

Though four rounds of the UN sanctions do not forbid the purchase of Iranian oil, many international oil firms and trading companies have stopped trading with Iran.