"Closing the Strait of Hormuz for Iran's armed forces is really easy ... or as Iranians say it will be easier than drinking a glass of water," Iran's navy chief Habibollah Sayyari told Iran's English language Press TV on Wednesday. "But right now, we don't need to shut it as we have the Sea of Oman under control and we can control the transit," said Sayyari, who is leading 10 days of exercises in the Strait.
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 over what the U.N. nuclear watchdog says is an attempt to design an atomic bomb, but left open the idea of an embargo on Iranian oil.
Iran, which says it is developing nuclear energy for peaceful purposes, warned on Tuesday it would stop the flow of oil through the Strait of Hormuz, in the Gulf if sanctions were imposed on its crude exports.
The announcement over the possible closure of the only access channel for eight U.S.-aligned, Gulf Arab states to foreign markets, pushed up international oil prices on Tuesday although they slipped back on Wednesday in thin trade and as the market dismissed it as rhetoric.
"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 U.S. 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 U.S. Department of Energy.
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.
It was not immediately clear what Sayyari meant by controlling the Sea of Oman, but the Iranian navy has been developing its presence in international waters since 2010 for counter-piracy operations and also to show off its naval power.
Iran's international isolation over its defiant nuclear stance is hurting the country's oil-dependent economy, but Iranian officials has shown no sign of willingness to compromise. Iran dismisses the impact of these penalties, saying trade and other measures imposed since the 1979 Islamic revolution toppled the U.S.-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 admitted have that foreign sanctions were hurting the key energy sector that was in desperate need of foreign investment. Though four rounds of the U.N. sanctions do not forbid the purchase of Iranian oil, many international oil firms and trading companies have stopped trading with Iran.
So far, big trade partners of Tehran - Russia and China -have blocked a ban on Iran's oil exports at the United Nations. Iran's arch-foes Israel and the United States have not ruled out military action if diplomacy and sanctions fail to rein in Iran's nuclear work.
The presence of U.S. naval forces in the Gulf to secure a free passage for oil has increased concerns over a possible military conflict if Iran tries to block the waterway.
Analysts say Tehran could retaliate against any military strike by launching hit-and-run attacks in the Gulf and by closing the Strait of Hormuz. About 40 percent of all traded oil leaves the Gulf region through the strategic waterway.
An Iranian analyst who declined to be named said the leadership could not reach a compromise with the West over its nuclear activities as it "would harm its prestige among its core supporters". "Iranian officials are showing their teeth to prevent a military strike," said the analyst.
"Closing off the Strait of Hormuz will harm Iran's economy that will be very dangerous for the establishment ahead of the parliamentary vote."
Iran will hold its parliamentary election in March, the first litmus test of the clerical establishment's popularity since the 2009 disputed presidential vote, that the opposition says was rigged to secure Ahmadinejad's re-election.
The vote was followed by eight months of anti-government street protests and created a deepening political rift among the hardline rulers.
With the opposition leaders under house arrest since February and the main reformist political parties banned since the vote, Iranian hardline rulers are concerned a low turnout would question the establishment's legitimacy.
Frustration is simmering among lower- and middle-class Iranians over Ahmadinejad's economic policies. Prices of most consumer goods have risen substantially and many Iranians struggle to make ends meet.