With the death of Kim Jong-Il in December after nearly twenty years of iron fisted rule, the world looked on as his rotund and politically inexperienced son, Kim Jong-Un, ascended to power at the tender age of 27(ish) in a series of televised events. While many hope that this will open up an opportunity for reform in the country, others fear that it will set off a bout of political instability and the collapse of the country. In the event of total collapse, it is feared that the United States could inadvertently be drawn into military conflict with China as the former rushes in to secure nuclear weapons and the latter rushes in to stop a torrent of refugees. Sure, everything looks calm now in North Korea, but no one really knows what is going on under the veil of secrecy that shrouds the country.
The Bottom Line: With the strictest sanctions ever imposed on Iran squeezing the country's oil industry futher, it's not surprising that people worry about a looming confrontation with the West. While outright military confrontation is unlikely, even the threat of a major disruption in the oil supply could send oil prices soaring, sending the world economy and its nascent recovery back into recession.
It looks like it's going to be another hot year in Iran. With 2012 barely a week old, we're already seeing a crisis brewing. The United States and Europe have recently decided on some of the toughest sanctions yet on Iran, targeting, in particular, their oil industry, a major source of national income. In addition the West is increasingly putting pressure on Asian importers of oil like Japan and Korea to reduce their reliance on Iranian oil. In short, Iran has a lot to lose from these sanctions, and they're obviously not too happy about them. In fact, they've threatened to block the Strait of Hormuz, a vital artery for the export of Middle Eastern oil. While most experts don't think that Iran would actually go through with their threat and risk a potential military confrontation with the West, world governments are already hatching plans to release emergency oil reserves just in case the flow of oil is disrupted in the coming months. Even without a major confrontation, the simple threat of instability in the Middle East could send oil prices soaring, resulting in fledgling economic recoveries all across the globe coming to a screeching halt.