London: World oil prices spiked more than six per cent Thursday on President Donald Trump’s warning that Iran made ‘a very big mistake’ after it boasted of downing a US ‘spy drone’.
The developments accelerated day-on-day gains in US oil benchmark WTI in late New York morning trading. Europe’s Brent Crude rose by nearly five per cent at one point, before both contracts pulled back somewhat.
Iran shot down the drone near the Strait of Hormuz, a major choke point for world crude shipments, spurring market fears of a confrontation that could badly constrain supplies.
Further solid support for oil prices, as for global stock markets, also came from the US Federal Reserve signalling it could soon cut interest rates, while the dollar and US Treasury yields fell.
The Bank of England, leaving key interest rates unchanged, warned against the rising danger of a no-deal Brexit, which analysts took as a sign that it, too, seems ready to take a more accommodating stance.
Iran’s Revolutionary Guards said they shot down a US ‘spy drone’ which violated Iranian airspace near the Strait of Hormuz, in the latest incident to stoke tension in the area. The US later confirmed that a surveillance drone designed for high-altitude missions was brought down by Iranian forces, but insisted it was in international airspace.
“This will only stoke tensions in the region and produce short-term support for oil prices,” said analyst Neil Wilson at trading site Markets.com.
The drone incident comes amid worsening tensions between Iran and the United States. The US has accused Iran of being behind a series of operations against oil tankers in highly sensitive Gulf waters, including two tanker attacks in the Gulf of Oman last week.
Tehran has denied involvement. It has floated the possibility Washington could be the author of the attacks, using the operation to justify force against Iran.
AP