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U.S. oil has its biggest one-day price increase in six years, driving up the cost of gas
Oil prices surged Thursday, threatening to further drive up the price of gas as hopes for a near-term resolution to the Iran war faded following President Donald Trump’s address to the nation.
Stocks were volatile, with major indexes plunging early in the day before moving higher at the close on shifting headlines about the war in the Middle East.
U.S. indexes recovered their early losses on news that Iran’s deputy foreign minister said his country would outline a “new navigation regime” in the Strait of Hormuz after the war ended, injecting fresh optimism into markets over the future of the key waterway.
At the closing bell at 4 p.m. ET, the S&P 500 closed up 0.11%, the Nasdaq Composite ended higher by 0.18%, and the Dow Jones Industrial Average fell 61 points. The Russell 2000 index, which tracks smaller companies, rose 0.7%.
In a contrast with stocks, oil prices hardly moved on the Iranian official’s comments about the future of the Strait of Hormuz.
The cost of U.S. crude oil continued pushing higher to more than $111 per barrel, up nearly 12% since Wednesday, its biggest one-day price jump in six years. For the year, it’s now up 94%.
Brent, the international oil benchmark, rose nearly 8% to more than $109 per barrel. For the year, the price of Brent has surged nearly 80%.
In his speech Wednesday, Trump said the war would end “shortly,” but he simultaneously pledged to conduct additional “extremely hard” strikes on Iran “over the next two to three weeks.”
Missing from Trump’s address was any structured path to a ceasefire. He likewise did not put forth any plans to reopen the strait, through which more than 20% of the world’s oil supply typically passes.
“The strait will open up naturally,” Trump said at the White House.
He also emphasized that the war will continue until the U.S. military’s objectives were “fully achieved.”
Oil prices began rising while Trump was speaking Wednesday night and kept climbing, reversing two days of declines.
Global crude oil prices directly affect the price of fuel in the U.S., where the average cost of a gallon of unleaded gas was $4.08 Thursday, according to AAA. That’s up from just $2.98 a gallon before the war.
The “markets wanted something different,” UBS Global Wealth Management CIO Paul Donovan wrote in a note Thursday about Trump’s address. “U.S. escalation (however short-lived) risks being met with an Iranian response, threatening more infrastructure damage in the Gulf.”
