Oil prices respond to US Navy’s shootdown of Iranian drone

Oil prices rose Thursday following news that a U.S. Navy ship had shot down an Iranian drone in the Strait of Hormuz.

Brent crude went up 0.9% at $64.24 a barrel while West Texas Intermediate futures were 0.6% higher at $57.1`2 a barrel. Observers say the steep increase in oil prices underscores the sensitivity of the markets to the oil disruptions in the Persian Gulf.

Later Thursday, prices switched to a 2.9% drop to $61.9 a barrel when investors focused on an increase in fuel stockpiles including a 3.6 million barrel jump in gasoline inventories.

President Trump announced the shoot down of the drone hours after Iranian forces claimed to have seized a foreign tanker. He said the USS Boxer, an amphibious assault ship took defensive action against the drone which he was was “threatening safety of the ship and the ship’s crew.”

The President said the drone was immediately destroyed. A Defense Department official confirmed the drone came too close to the USS Boxer and was shot down while the ship was in international waters.

The encounter Thursday came after Iran’s Islamic Revolutionary Guard Corps said it had seized a tanker, ratcheting up fears that Tehran could further disrupt shipping traffic on a vital waterway for crude.

The Guard took possession of a small vessel carrying what it said was 1 million liters of smuggled fuel near the island of Larak in the Persian Gulf on Sunday, according to a press release quoted by Iran’s state news agency, IRNA.