Oil prices spiked on Thursday after Iran shot down a U.S. drone over the vital oil shipping lane, the Strait of Hormuz, in the latest escalation of the U.S.-Iran standoff in the Middle East that increased concerns about a possible military confrontation.
Oil prices were rising by some 4 percent earlier on Thursday after news of the downed drone broke, but oil further spiked, with the U.S. benchmark WTI Crude jumping 6 percent, after U.S. President Donald Trump tweeted "Iran made a very big mistake!"
As of 12:22 p.m. EDT on Thursday, WTI Crude was soaring 5.47 percent at $56.92, while Brent Crude was surging by 4.09 percent at $64.35.
Early on Thursday, the price of oil jumped after Iran said that its Islamic Revolution Guards Corps (IRGC) shot down a "US-made Global Hawk spy drone" on its southern coast near the vital oil chokepoint, the Strait of Hormuz. Later in the day, the IRGC said that it shot down the drone after "the unmanned aircraft was targeted after violating Iran's airspace over the Southern coasts," Iran's Fars news agency reports.
The United States confirmed that its drone was shot down, with the U.S. Central Command saying that it "can confirm that a U.S. Navy Broad Area Maritime Surveillance (or BAMS-D) ISR aircraft was shot down by an Iranian surface-to-air missile system while operating in international airspace over the Strait of Hormuz at approximately 11:35 p.m. GMT on June 19, 2019."
The latest incident comes after the U.S. blamed Iran for the attacks on two oil tankers in the Gulf of Oman near the Strait of Hormuz last week.
On Thursday, oil prices spiked on the latest escalation of tension, while a dovish Fed signaling rate cuts ahead boosted equity markets and hit the U.S. dollar, which in turn propped up commodities, including oil.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More