A rumor that Iran had closed the Strait of Hormuz sent oil prices skyrocketing today, but the story turned out to be inaccurate and was likely a result of confusion surrounding an upcoming Iranian military drill set to take place near the key oil choke point.
As we reported yesterday, an Iranian MP went public with the claim that Iran was about to stage a military drill to practice closing the Strait of Hormuz, after which the Iranian military declined to comment. Earlier today, the Tehran Times confirmed that Iran was preparing to "practice its ability to close the Strait of Hormuz."
A report out of real-time analysts Ransquawk then claimed that the channel had in fact already been closed, a rumor that sent traders scrambling.
"By 10:40 a.m. EDT oil had jumped from $98.590 before the rumor, to $101.25 at its peak, and has settled to $100.30 — still sitting almost $2 higher than before the supposition began," reports Business Insider.
At time of press, prices have settled to around $99 dollars a barrel.
Other reports confirm that the Strait was not closed at any point. Iran's Foreign Ministry has confirmed that the Strait is open, reports Bloomberg. In addition, Ransquawk now reports that the U.S. fifth fleet has confirmed maritime traffic in the Strait is normal.
The dramatic surge in oil prices seems to have been triggered by confusion that Iran had closed the Strait of Hormuz, not that it was merely preparing to practice such an eventuality in the form of a military exercise.
Experts have predicted that oil prices will surge to $300-$500 dollars a barrel if Iran closes the shipping channel in retribution for a US/Israeli attack on the country's nuclear facilities.
The Strait of Hormuz, just 34 miles wide at its narrowest point, is a key transport passage for petroleum exporting countries from the Persian Gulf, with the 15.5 million barrels of oil that pass through it each day representing 33% of the world's total oil shipments.