EU Foreign Ministers had adopted an “unprecedented” oil embargo against Iran over its nuclear programme which came into affect on 1 July 2012. In turn Iran has taken the first step towards military intervention in the Strait of Hormuz - a move that could can increase the global oil prices and even can lead to military clashes.

The National Security and Foreign Policy Commission of the Iranian Parliament has drafted a bill which permitted the government to stop oil tankers passing through the Strait of Hormuz that ferry crude oil for countries that had targeted Iran with harsh oil and financial sanctions.

Iran is the second-biggest oil producer after Saudi Arabia in OPEC, the oil cartel. About 20% of the world’s oil supplies pass through the Strait of Hormuz and if it is blocked by Iran, oil supply will decrease tremendously.

The Paris based International Energy Agency (IEA) is forecasting that once sanctions are fully in place in the second half of this year, the world oil markets would lose a daily supply of around one million barrels - a standalone factor that would encourage higher oil prices. 

Exports have been further affected because insurance companies in the EU are no longer covering tankers exporting Iranian crude to non-European destinations.