Iran is flexing its military muscles in the Straits of Hormuz where 20% of world oil supplies pass through. US naval bases, headquartered in Iraq, Bahrain and Qatar, are not far from where Iran’s war games were held. Only few weeks ago US held its war games in the same region. Iran is giving a very strong message to the US and its allies in the Gulf. The message is one of belligerence, dominance and rising regional superpower status. Iran had nearly achieved its regional aims in 1979 had it not been for Saddam’s aggression that resulted in 8 years of bloody war with 1 million dead and about $500 billion in economic loss. Iraq’s once feared 500,000 soldier army has disappeared as a bulwark protecting Arab monarchs. Iran now has only to deal with the US-Israel military threat for its complete domination of the greater Middle East region. Militarily Iran may still be far behind industrialized nuclear states. But with large oil and gas reserves and a largely homogenous demography Iran can muster a united national spirit against any foreign hostility. Iraq could not bring its nationalities (Shiites, Kurds and Sunnis) together due to the very fascist nature of the Baath party. Iran on the other hand is shiite majority Persian speaking muslim country, which glues together social fragments into national unity. Iranian politicians did not enter the Persian Gulf War Games, right in the face of the US bases, without strategic calculations of consequences both diplomatically and militarily. The West may punish Iran with more sanctions, but it does not help to normalize the situation in the Persian Gulf. Based on Iran’s current War Games strategy US-Israeli threats are clearly not working either.