Oil prices surged more than 6 percent on Thursday after reports that an Iranian missile shot down a U.S. spy drone over the Strait of Hormuz, raising concerns about the possibility of an impending military confrontation between Tehran and Washington as tensions continue to escalate.
"Iran made a very big mistake!" President Trump wrote on Twitter mid-morning.
The price crude also rose thanks to a dovish pivot by the Federal Reserve on Wednesday, which boosted U.S. financial markets after policymakers at the central bank signaled they were prepared to cut interest rates no later than 2020.
U.S. officials said an Iranian surface-to-air missile shot down a Navy high-altitude drone, which was flying 17 miles from Iran in international airspace. Iran also tried to shoot down a second missile, but missed, according to U.S. officials. This is the second drone that’s been shot down within one month.
A commander for Iran’s revolutionary guard said the shooting sends a “clear message to the U.S.” and signals that Iran is “ready for war” -- he noted, however, that Iran has no intention of war with anyone.
Oil prices also spiked last week after an attack on two oil tankers in the Gulf of Oman, a major export route. The U.S. has blamed Iran for the attacks, but Iran denied the allegations.
However, OPEC slashed its outlook for oil consumption in 2019, blaming international trade tensions for hurting demand for crude while also pointing to further challenges ahead.
In a monthly report, the Organization of the Petroleum Exporting Countries said world oil demand will increase by close to 1.14 million barrels per day this year -- 70,000 bpd less than initially expected. In the first quarter, demand increased by less than 1 million barrels a day. Output also fell in May, as a result of U.S. sanctions on Iran.
"This is proof that we need to continue to ramp up the pressure with economic sanctions," Rep. Andy Barr, R-Ky., told FOX Business' Charles Payne during an interview on Thursday.
However, Democrats have accused both the White House and Republicans of intentionally trying to stoke tensions with Iran after the Department of Defense authorized an additional 1,000 troops to the Middle East.
“This deeply concerning decision may escalate the situation with Iran and risk serious miscalculations on either side," House Speaker Nancy Pelosi said in a statement earlier this week. "Diplomacy is needed to defuse tensions, therefore America must continue to consult with our allies so that we do not make the region less safe.”
Fox News’ Lucas Tomlinson contributed to this report.