- Associated Press - Wednesday, December 28, 2011

TEHRAN The U.S. warned Iran on Wednesday that it will not tolerate any disruption of traffic through the Strait of Hormuz after Iran threatened to choke off the vital Persian Gulf oil transport route if Washington imposes sanctions targeting its crude exports.

The increasingly heated exchange raises new tensions in a standoff that has the potential to spark military reprisals and propel oil prices to levels that could batter a global economy already grappling with the European debt crisis.

Iran’s navy chief boasted Wednesday that it would be “very easy” for his country’s forces to close the strategic Strait of Hormuz, the passage at the mouth of the Persian Gulf through which a sixth of the world’s oil passes daily.

It was the second such threat in two days following a warning by Iran’s vice president that Tehran was close

Iran has comprehensive control over the strategic waterway,” Adm. Habibollah Sayyari told state-run Press TV, as the country was in the midst of a 10-day military drill near the waterway.

The comments drew a quick response from the U.S.

“This is not just an important issue for security and stability in the region, but is an economic lifeline for countries in the Gulf, to include Iran,” Pentagon press secretary George Little said. “Interference with the transit or passage of vessels through the Strait of Hormuz will not be tolerated.”

Separately, a spokeswoman for the Bahrain-based U.S. 5th Fleet said the Navy is “always ready to counter malevolent actions to ensure freedom of navigation.”

Iran’s threat to seal off the Gulf, surrounded by oil-rich states, underlines the depth of worry about the prospect that the Obama administration will go ahead with sanctions because of its nuclear program that would severely hit its biggest revenue earner - oil.

The sanctions themselves have raised worries that removing Iran’s crude from the market will lead to a spike in oil prices.

Gulf Arab nations appeared ready to at least ease market tensions. A senior Saudi Arabian oil official told the AP that Gulf Arab nations are ready to step in to offset any potential loss of exports from Iran, which is the world’s fourth-largest oil producer.

Saudi Arabia, which has been producing about 10 million barrels per day, has an overall production capacity of more than 12 million barrels per day and is widely seen as the only OPEC member with sufficient spare capacity to offset major shortages.

But Iran - OPEC’s second-largest producer - pumps about 4 million barrels per day, meaning that other Gulf states also would have to increase their output to offset the decline.

What remains unclear is what routes the Gulf nations could take to bring that production to market if Iran goes through with its threats.

About 15 million barrels per day pass through the Strait of Hormuz, according to the U.S. Energy Information Administration.