Oil saw a brief spike on Wednesday, December 28, as Iran threatened to close down the Strait of Hormuz, one of the world's most vital oil passageways.
The Associated Press reports that two officials from the Middle Eastern nation mentioned the possibility of closing the strait in response to increasing pressure from the West to open up its nuclear program for inspection and renewed calls for sanctions against the country.
"Closing the Strait of Hormuz is very easy for Iranian naval forces," Admiral Habibollah Sayyari, Iran's naval chief, told state-run Press TV, according to the AP. "Iran has comprehensive control over the strategic waterway."
The Strait of Hormuz is responsible for around one-sixth of all the world's oil, serving as the only water access from the oil-rich Persian Gulf to the rest of the world.
Reuters reports that Brent crude oil rose more than 1.4 percent in response to the news, reaching as high as $109.50 per barrel, before settling to $109.27 per barrel.
The Associated Press reports that prices quickly dropped as low as $108.45 per barrel after Saudi Arabia pledged to account for any drop in production because of the closure of the strait.
Risk Disclosure
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.
