The price of oil spiked on Tuesday after rumors that Iran might close the Strait of Hormuz, disrupting supplies from the Persian Gulf.
Prices for oil jumped more than two percent in York, rising $2.37 to $100.14 per barrel as traders reacted to chatter that Iran is practicing drills on closing the Strait of Hormuz. At some points in the day, oil rose as much as 3.6 percent before the jump was lessened by a denial of the rumor from Iran's Foreign Ministry.
A spokesman for the Foreign Ministry said the strait remains open, and that the country is not planning to close the vital waterway. The spokesman suggested the rumor was started by people who don't have official title.
If the world wants to make the region insecure, we will make the world insecure, the spokesman said according to the website of the state-run Iranian Students News Agency.
Roughly one-third of the world's oil tanker traffic passes through the Strait of Hormuz, according to The Associated Press, and just a brief closure would put a noticeable clamp on global supplies, likely sending prices higher.
There's just a lot of chatter out there, said Addison Armstrong, director of market research at Tradition Energy, in an interview with the AP during the trading day. He said, There are a lot of possibilities of what might happen, but that traders were erring on the side of buying as opposed to selling.
Meanwhile, as oil prices have risen gas prices in the U.S. have remained surprisingly stable, due mostly to lackluster demand. The average price per gallon averaged $3.269 in the past week, according to AP, some 15 cents less than last month and 29 cents cheaper than one year ago. Refineries have been caught in a classic squeeze play, having to drop prices at the pump while the price of oil rises.