Tensions in the Persian Gulf escalated after Iran threatened to block the strategic Strait of Hormuz, through which 15 million barrels of tanker-borne oil flows every day, if the West imposes new sanctions to throttle Tehran's oil exports.

"Closing the Strait of Hormuz is very easy for Iranian naval forces," Adm. Habibollah Sayari, commander of the regular Iranian navy, declared in Tehran Wednesday.

"Iran has comprehensive control over the strategic waterway."

Iran's first vice president, Mohammad-Reza Rahimi, said Tuesday that "if they impose sanctions on Iran's oil exports, then even one drop of oil cannot flow from the Strait of Hormuz."

Some security experts say the Iranians would be able to close the 112-mile long, horseshoe-shaped waterway for only a few days because the U.S. Navy 5th Fleet, the most powerful naval force between the Mediterranean and the Pacific Ocean, would intervene.

But the Iranian navy and the naval arm of the elite Islamic Revolutionary Guard Corps are conducting a major exercise near the strait at the southern end of the gulf and in the Gulf of Oman.

This is widely perceived as a high-profile rehearsal for closing the global oil artery.

The Velayat-90 exercise, one of the largest by Iranian naval forces, and the saber-rattling by Iranian commanders has spooked the oil market and pushed up oil prices to around $108 a barrel.

The 10-day drill, which began Saturday, covers a 1,250-mile stretch of sea south of the strait and is certain to put Iranian warships into close proximity with the 5th Fleet and British warships deployed in the gulf.

The strait is 34 miles wide at its narrowest point. But shipping is funneled through a traffic zone 6 miles wide, with two 2-mile lanes, inbound and outbound, separated by a 2-mile median to prevent collisions.

The Iranians would likely use a combination of sea mines, of which they are reported to have a large store, and anti-ship cruise missiles from batteries studded along the coastline and on strategic islands in the waterway.

These forces would be backed up by swarms of Revolutionary Guard armed speedboats darting out from bases to attack tankers and other vessels. These were used to considerable effect during the so-called Tanker War that was part of the 1980-88 war between Iran and Iraq.

The intervention of the U.S. Navy to protect Arab shipping from Iranian attacks eventually eliminated that threat.

The U.S. Energy Information Administration describes the Strait of Hormuz as "the world's most important oil chokepoint." Most of the outbound tanker traffic, carrying about 33 percent of the world's seaborne oil shipments, is headed for Asia, mainly China and India.

But, as oil is a globally traded commodity, any serious shortage has a major economic impact worldwide. Some financial specialists have suggested that a closure of the Strait of Hormuz would send oil prices soaring to $250 a barrel, and higher.

The threats by Sayari, Rahimi and others were in response to Western moves to tighten already stringent international sanctions against Iran to severely limit the amount of oil it can export.

Oil exports are Iran's economic lifeline. The Islamic Republic is the fourth largest oil producer in the world, with an output of around 4 million barrels per day.

The objective of the sanctions is to force Iran to abandon its contentious nuclear program which the West claims is aimed at producing nuclear weapons.

Iran says its program is peaceful and aimed at boosting electrical power supplies.

A new oil crisis could trigger a military conflict between Iran and Western powers dependent on Persian Gulf oil.

Four rounds of sanctions have been imposed on Iran since 2006 over its nuclear project. These have damaged its economy, but the country remains defiant.

Amid efforts to hit its oil exports have been impeded in the United Nations by China and Russia, key trading partners with Iran and major customers for its oil.

But the U.S. Congress has passed a bill prohibiting dealings with Iran's Central Bank which handles many oil transactions.

Saudi Arabia, the world's largest oil producer, has reportedly said it and its gulf partners will boost production to cover banned Iranian exports.

But since the oil these states produce also has to go through the threatened strait that may not mean much.

The Strait of Hormuz: key route for world's oil
Dubai (AFP) Dec 28, 2011 - The Strait of Hormuz, which Iran has threatened to block if the West applies sanctions on its oil exports, is a strategically important waterway through which 40 percent of the world's oil transits.

The strait links the Gulf, bordered by petroleum-rich states like Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, with Oman.

Iran's Vice President Mohammad Reza Rahimi warned Tuesday: "If sanctions are adopted against Iranian oil, not a drop of oil will pass through the Strait of Hormuz."

Several Western states are considering oil sanctions against Iran over its nuclear programme, accusing it of seeking to develop nuclear weapons.

The narrow Strait of Hormuz has a maximum width of some 50 kilometres (30 miles) and a maximum depth of 60 metres (200 feet).

The corridor is dotted with little-inhabited desert islands, which are nevertheless strategically important, notably the Iranian islands of Hormuz and Qeshm and Hengam off Bandar Abbas.

Oman's Musandam Peninsula juts out to the Strait of Hormuz towards Iran, separated from the rest of the sultanate by land belonging to the UAE.

With their back to the UAE coast, the three strategic and disputed islands of Greater Tunb, Lesser Tunb and Abu Musa serve as observation posts on all Gulf States: the UAE, Qatar, Bahrain, Saudi Arabia, Kuwait, Iraq and Iran.

Iran under the Western-backed shah gained control of the islands in 1971, as Britain granted independence to its Gulf protectorates and withdrew its forces.

Abu Musa, the only inhabited island of the three, was placed under joint administration in a deal with Sharjah, now part of the UAE.

But the UAE says the Iranians have since taken control of all access to the strategic island and installed an airport and military base there.

Iran's Revolutionary Guard, the ideological army of the Iranian regime, controls naval operations in the Gulf and the Strait of Hormuz.

In the event of war, the Islamic republic could block access to the oil-rich region, according to a US intelligence report published in late 2009.

More than a third of the world's tanker-borne oil passes through the Strait of Hormuz.

The United States maintains a navy presence in the Gulf in large part to ensure that passage remains free.

Iran is carrying out navy exercises in international waters to the east of the Strait of Hormuz.