Iran has cut off oil shipments to France and Britain in retaliation for tough new sanctions from Europe, which, starting July 1, will impose an embargo on Iranian oil, a crucial source of revenue for Tehran, in an attempt to force Iran to curb its nuclear program. Iran also threatened to stop oil sales to Spain, Greece, Italy, Portugal, Germany, and the Netherlands if they remain "hostile" to Tehran, sending oil prices to a nine-month high. How badly will Iran's latest gambit hurt Europe?

The damage to Europe could be severe: Iran's "blackmail" could work, says Niall Ferguson at The Daily Beast. Europe isn't a giant importer of Iranian oil, but some of Tehran's biggest European customers — Spain, Italy, and Greece — are in dire shape. "If even the rumor of an Iranian export ban could send the price of oil above $120 a barrel, what would a full-scale showdown between Iran and Israel do? Answer: It would inflict yet more economic misery on Europe, which gives Brussels a big incentive" to go easier on Iran.
"Iran uses European oil dependence as blackmail on nukes"

Actually, this will blow over: Iran can't do much damage by cutting oil shipments to the U.K. and France, says Kevin Allison at Reuters. Neither relies much on Iranian oil in the first place, and they've had plenty of time to line up alternative supplies in recent weeks. The stock market barely blinked when Iran decided to pre-empt Europe's embargo, because investors know prices will drift back down from $120 a barrel soon. It would take something "much bigger to create a real problem."
"Higher oil price should burn itself out"

This might hurt Iran most of all: Iran has been threatening to do this for weeks, says Outcome Magazine, but it held off because it knows that "ceasing all exports to the EU would harm its own economy" unless it can line up replacement buyers in Asia. After all, Europe buys 20 percent of Iran's crude. And Iran's decision may not hurt Europe at all now that Saudi Arabia — a U.S. ally and Iran rival — has promised to "pump more oil to compensate" for the loss of Iran's crude.
"Iran threatens to cut oil to more EU nations"