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Oil shot up as Iran says & # 39; & # 39; It's ready for war & # 39; & # 39;



Oil was awakened from its sleep after another rise in escalation between the US and Iran, although the case was only more important to the oil markets because of a more optimistic economic outlook.

In the early hours of Thursday, Iran shot down an American drone, where both sides reported conflicting accounts. The United States says the drone was in international waters, while Iran says the drone had entered the Iranian sky. The incident adds the tension between the two countries.

"This was an untested attack on a US surveillance asset in international airspace," Navy Capt says. Bill Urban, spokesman for US Central Command.

"Borders are our red lines. Any enemy invading these borders will not return [home]," said Hossein Salami, commander of the Islamic Revolutionary Corps. "We have no intention of going [to] with any country, but we are ready for war."

In early trading on Thursday, WTI was more than 4 percent, and Brent was more than 3 percent, rising to the highest level since late May.

The Trump administration has a confused strategy for Iran, with the ultra-hookers John Bolton and Mike Pompeo in the driver's seat and the slightly more skeptical President Trump giving his advisers. As such, it is difficult to find out who is calling the shots and even harder to predict what will happen next time. While Trump has been more careful, the Washington Post reported that Pompeo sent a private warning to Iran that a single attack on a single American everywhere would lead to a military strike. Very Aggressive Clean Energy Bill

But it's important to remember how we came here. Last year, the United States unilaterally left the nuclear agreement in 201

5 and imposed counterfeiting of Iran sanctions, although Iran was in accordance with the terms of the agreement. Then, the United States introduced a list of a dozen relationships that everyone understands as impossible for Iran to meet, essentially closing down any possibility of a negotiated solution. Earlier this year, although Iran remained in line with nuclear power, the United States sent warships and more troops to the region and tried to take Iran's oil exports down to zero.

The trump administration calls it the "maximum pressure" campaign, and it has actually led to little pressure. Iran has knocked out, sometimes through proxies, and also through its recent decision to resume storage of low-enriched uranium. These events are then used to justify the next escalation cycle. Without a ramp, it is totally unhelpful that the two nations are on the brink of war. The scary thing is that there is still no off ramp. Both sides seem to be locked into, at best, a long-standing simmering standoff, perhaps similar to that unfolding in Venezuela. Or they will go to war.

Surprisingly, the fast tip in tension has only moved the crude oil prices into fits and starts over the last couple of weeks. The prospect of a major war and the potential disturbance of the maritime transport in the Persian Gulf were largely shifted by oil traders.

But on Thursday, oil prices showed some signs of life, with WTI moving back to mid-$ 50s and Brent in the mid $ 60s, the highest price in weeks. The difference this time is that financial and commodity traders have reason to hope that a serious economic downturn can be avoided. Related: Is Big Oil's Plastic Bet Going Sour?

The US Federal Reserve made a deaf position in comments Wednesday. The central bank recognized low inflation and soft business activity, while observing that the economy was strong, admitted that "the uncertainty surrounding this outlook has increased." The bank left the interest rate unchanged, but loosened some of its language. The financial markets took this as a shift in strategy, and betting that interest rate hikes are in the off, perhaps as soon as next month. The stock markets rose on the news.

Meanwhile, the second jolt came up with positive news on the trade front. The US and China confirmed a meeting between Trump and Xi Jingping next week in Japan, and trade talks resumed prior to the meeting. Trump said on twitter that he had a "really good" call with Xi, and while the connectors and the commercial war are still significant and the gap between the two sides remains wide, there is at least a glimpse of hope for a resolution.

Of course, the situation is dynamic – Fed rate cuts hinges on the outcome of trade negotiations. But with any kind of optimism on the economy for the first time in weeks, they reduced the bearish forces on oil. Ultimately, it allowed the tension between the US and Iran to move back to the forefront of driving oil prices at least until now.

By Nick Cunningham from Oilprice.com

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