Persian Gulf Incident Could Heat Up Crude Prices

A US Navy supply ship fired on a small boat of the cost of Dubai after the boat failed to respond to warnings and continued its rapid approach toward the Navy ship. The New York Times reports that one person on the small boat was killed. A Navy spokesman emailed a statement that included the following information:

In accordance with Navy force protection procedures, the sailors on the U.S.N.S. Rappahannock used a series of non-lethal, preplanned responses to warn the vessel before resorting to lethal force. The U.S. crew repeatedly attempted to warn the vessel’s operators to turn away from their deliberate approach. When those efforts failed to deter the approaching vessel, the security team on the Rappahannock fired rounds from a.50-caliber machine gun.

The incident is likely to raise tensions in the Gulf, where Iran is once again threatening to close the Strait of Hormuz and the US Navy has increased its presence.

The price of Brent crude is up about 2% today, at $103.30, although much of that appears to have been gained before the incident in the Gulf. WTI crude is also up today, at $88.33, about 1.4% higher than Friday’s close.

Paul Ausick