Oil and natural gas surge after Iran orders Strait of Hormuz closure

U.S. crude prices rose 4.68%, or $3.33, to close at $74.56 per barrel, while global benchmark Brent gained 4.71%, or $3.66, to settle at $81.40. Prices had surged more than 9% earlier on fears the widening war in the Middle East would result in a prolonged disruption to regional oil and gas supplies.

But prices eased signficantly in late afternoon trading after Trump sought to reassure ship owners that they could safely transit the Strait of Hormuz. U.S. crude oil was up more than 2% while Brent was up 3% after the president’s announcement.

Trump said the U.S. Development Finance Corporation will “provide, at a very reasonable price, political risk insurance and guarantees” for the financial security of all maritime trade through the Gulf.

“If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible,” the president said in a social media post.

Tanker traffic through the Strait has ground to a halt as ship owners take precautionary measures over conerns they could be targeted in retaliatory strikes by Iran.

The Strait is the most important chokepoint for oil in the world. About 20% of global crude consumption is exported through the waterway primarily to customers in China, India, Japan and South Korea.

Wall Street commodities strategists have warned that oil prices could surge above $100 per barrel if the Strait is closed for a prolonged period.

Trump said earlier Tuesday that the war with Iran may result in “a little high oil prices for a little while,” but predicted prices will drop once the conflict is over.