Nightly News   |  January 13, 2012

Plunging U.S.-Iran relations

The Strait of Hormuz has become a flashpoint and now tensions could escalate beyond angry rhetoric. NBC’s Richard Engel reports.

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>>> now to the rising tensions overseas with iran , over that country's threat to close a vital oil- shipping lane in international waters in retaliation for sanctions over its nuclear program . the u.s. is warning iran now publically and through back channels privately, not to try anything. our chief foreign correspondent richard engel has more on this high-stakes dangerous standoff.

>> reporter: today in tehran, the funeral of a nuclear scientist assassinated this week, and everyone knows who to blame. death to israel, death to america they shout. u.s./ iran relations are plunging fast and military analysts warn this could escalate well beyond angry rhetoric. the likely slash point, the strait of hormuz , the most important waterway on earth. 1/5 of the world's oil moves through the strait, 21 miles at its narrowest and it crosses right through iranian waters. tensions escalated dramatically in recent days. first, washington imposed harsh sanctions on iran and pressured the world to follow suit. iran staged a show of force. threatening to close the strait. that would send oil prices skyrocketing. the logic for iran if we suffer with sanctions, so will everyone else. it is a risky move. the u.s. fifth fleet is within striking distance.

>> we cannot tolerate iran blocking the straits of hormuz. that's a red line .

>> reporter: just last week threes iranian speed boats approached a navy ship. they dismissed it as routine. nbc's top military analysts both warn a conflict is now a dangerous possibility.

>> these new economic sanctions actually start to strangle the iranian economy . the regime barely has control today, that the economy collapses, then they are going to take some action.

>> there is liable to be, if not likely to be, a confrontation of some kind.

>> reporter: with so much tension and military hardware in a tiny stretch of water, clashes can start by accident. it's happened before.

>> good evening, it was not supposed to happen, but it did.

>> reporter: in 1988 , tensions were also high. the u.s. thought it was under attack from iranian jets. what is wrong. the american warship shot down an iranian passenger jet over the strait of hormuz killing all 290 people onboard.

>> i think probably both of us agree, military confrontation in the gulf would be a disaster for everybody involved.

>> reporter: the good news, brian, is that both the u.s. and iran seem to recognize the danger of all this and are communicating and trying to back away from any potential conflict. there is, of course, another wild card , that american who was recently sentenced to death in iran for spying. some analysts are suggesting he could end up being a bargaining chip.

>> what a dangerous neighborhood. richard engel , thanks for your reporting tonight.