>> Iraq has acknowledged the strength of this strategy by halting its oil shipments

Iraq's supply of money is cut off almost immediately when they stop selling oil, so the Iraqis get hurt from the very start. Other producers, who have no interest in displaying solidarity with Iraq, open the taps a bit further and compensate. The tightening of supply and increase in prices, if it happens at all, is slow and gradual. Immediate pain for Iraq: possible slight future expense for America.

>> The US stock market has been plunged into panic.

Has it? I didn't notice the Dow Jones plunge ( http://www.nyse.com/marketinfo/dji.html).

Consumer boycotts are largely pointless, ineffective and, in the case of the US, virtually impossible. Are people going to stop using Microsoft software, scrap most of their wardrobe, throw away their cars, stop buying books, stop using oil, etc, etc, because it has some US interest attached to it?
As for rising oil prices, these tend to hit the poorest countries the hardest. For instance, it becomes more costly for a peasant farmer to take his crops and livestock to market. This is the problem many coffee growers found out in Central America - as the costs of transporting coffee grew from 1999, they literally starved.
Anyway, I think Saddam's motives are fucked up and the whole oil blockade nonsense won't get any further than a few rhetorical speeches from Al-Qaddafi, the Libyan tyrant.
Firstly, everyone knows he's been flouting the blockade with support from UAE, Bahrain, Iran, etc, and diverting the money into an arms build-up.
Secondly, he's not a nice man and he's never been that interested in Palestinians - if anything, he's turned them away when they've sought refuge in Iraq. He just wants to rally some of the Arab world's corrupt monarchies against Israel to deflect a US/UK attack.
Thirdly, Arab despots are largely reliant on the West for arms and favours. They are more interested in appeasing Bush than standing by the Palestinians because it's in their financial interest. Even most Iranians, who are really suffering deprivation under the US sanctions regime, would rather the mullahs drop the jihadic cause and make amends with the US.
The fact is that you can't rely on these autocratic regimes for change. It must be grass roots and I think that in the next year or so you will find such a great degree of militancy that , if they are not careful, certain regimes will topple. Already, Hosni Mubarak is quaking in his boots and instability threatens a number of other countries. The worrying thing is if it further inflames religious zealotry in the Islamic world.