uploads/2019/06/oil-3629119_1920-11.jpg

US-Iran Tension: What Does It Mean for Oil?

By

Updated

US-Iran tension

On June 20, after US military drone was shot down in the Middle East, President Trump decided to strike Iran. However, he reversed his decision. The potential for a war between Iran and the US still looms. President Trump called Iran’s act of shooting down the US drone a “very big mistake.”

Article continues below advertisement

Oil rose after Iran shot US drone

After Iran shot down a US drone, US crude oil August futures rose 5.7% on June 20 and settled at $57.07 per barrel. In the trailing week, US crude oil active futures rose 8.6%. Oasis Petroleum (OAS) and California Resources (CRC), the strongest oil-weighted stocks, rose 18.9% and 10.9%. Oasis Petroleum and California Resources operate with a production mix of 72% and 74.4% in oil price-linked commodities. The United States Oil ETF (USO), which holds active US crude oil futures, has risen 8.9% in the trailing week. In June USO has risen 6.8%—almost on par with US crude oil’s rise.

Oil heading for a record gain

As of 5:05 AM ET on June 21, US crude oil active futures were at $57.25, which is ~9% higher than the closing level the previous week. If US crude oil prices stay at these levels today, they will mark the highest weekly close since December 2, 2016.

Advertisement

More From Market Realist