The New York Times has just reported Iran's official confirmation that it is threatening to cut oil exports to six European countries. Earlier rumors of such a threat sent oil prices to a six-month high. Why is this important? Because, as the authors of a recent Nature article said (and as I myself have said in this space), "It seems clear that it wasn't just the 'credit crunch' that triggered the 2008 recession, but the rarely-talked-about 'oil price crunch' as well." Near-term, if the Iranian crisis spins out of control, the effect could be plunge the advanced industrial countries back into recession; long-term, permanently high oil prices would severely limit growth prospects.
A positive element in the current picture is Iran's declared willingness to resume nuclear negotiations with six counterparties (the so-=called P5 + 1), but pessimists worry that once again it may be just playing for time--talking to ease international pressure, only to resume suspect activities as soon as the pressure is off. Meanwhile, tensions between Iran and Israel have been sharply rising, as a handful of top Iranian nuclear scientsts have been assassinated, its enrichment facility was infected by the immensely ingenious Stuxnet virus, and its major missile test facility mysteriously blew up, killing the country's top rocket scientist. Earlier this week there were reports of assassination attempts on Israelis in three foreign countries, one of the attacks closely resembling from a procedural point of view two assassinations of Iranian scientists and engineers in Tehran.
The most recent round of escalation began with the release by the International Atomic Energy Agency of a report in November, finding that Iran had a full-fledged nuclear warhead development program up until 2003 and very likely has continued with some elements of that program.