The United States says its military forces in the Persian Gulf region are prepared to deal with any threat from Iran. Top Iranian officials have said they might close the Strait of Hormuz, a move that would disrupt world oil supplies.
Ready for action at sea, the U.S. Navy?s 5th Fleet at Bahrain is among the massive military resources that the U.S. has permanently based throughout the region. They are prepared to respond if tensions with Iran escalate into direct military action.
The Iranian military exercises this January are meant to show Tehran?s fire power. However, analysts say that after years of international sanctions, Iran would struggle to fight a war with its aging hardware.
"A lot of it was supplied at the time of the Shah. Others are relatively low quality imports from China and Russia. It has almost no modern surface-to-air missile capabilities. Virtually all of its major combat ships date back to the time of the Shah and have had only limited refitting," explained defense analyst Anthony Cordesman.
But that weakness has not stopped Iran from making threats to close the Strait of Hormuz. It also warned U.S. aircraft carrier, the USS John C. Stennis, not to return to the Persian Gulf.
The United States says there is room for diplomacy, but its forces will not allow an Iranian blockade.
"We cannot tolerate Iran blocking the Strait of Hormuz, and that's a red line," said U.S. Defense Secretary Leon Panetta.
The U.S. also warned Iran against developing nuclear weapons, something that could trigger an attack by Israel.
Without powerful or modern equipment, Iran would resort to what analysts say are asymmetric warfare capabilities - small boats, mines and missiles that could be used in small scale, hit-and-run attacks on U.S. forces.
They say a full scale offensive could cost Iran the destruction of its armed forces in a matter of days, in the event of war with the U.S. or Israel.
"The balance of power between the United States and Iran and between Israel and Iran is overwhelmingly in the favor of the United States and Israel," said defense analyst Bruce Riedel.
Iran has plenty of reasons not to engage the U.S. and its allies in a full-scale confrontation, but if it does, U.S. officials say they are ready.