Oil falls after Energy secretary wrongly claims tanker escort

Oil prices retreated Tuesday, even after Secretary of Energy Chris Wright wrongly claimed in a social media post that the U.S. Navy had escorted a tanker through the Strait of Hormuz.

“The U.S. Navy has not escorted a tanker or a vessel at this time,” White House Press Secretary Karoline Leavitt told reporters Tuesday.

U.S. crude oil fell 11.94% to close at $83.45 per barrel. Brent crude, the global benchmark, lost 11.28% to settle at $87.80. Prices fell more than 17% immediately after Wright’s post.

“I was made aware of this post,” Leavitt said. “I haven’t had a chance to talk to the Energy secretary about it directly.”

“However, I know the post was taken down pretty quickly,” she said.

Wright had said “the U.S. Navy successfully escorted an oil tanker through the Strait of Hormuz to ensure oil remains flowing to global markets.”

Traffic through the critical Strait has been severely disrupted as oil shippers fear attacks by Iran, keeping ships at anchor. About 20% of global petroleum consumption was exported through the narrow waterway prior to the war.

Emergency stockpile meeting

The International Energy Agency will hold an extraodrinary meeting on Tuesday to discuss a possible release of emergency stockpiles. The more than 30 members states are advanced economies in Europe, North America and Northeast Asia. They collectively hold 1.2 billion barrels of oil in reserve.

The Iran war has triggered the biggest supply disruption in the history of the oil, according to an analysis by Rapidan Energy. Saudi Aramco’s CEO warned that the war will have “catastropic consequences” for the market.

“While ​we have faced disruptions in the past, this one by far is the biggest crisis the region’s oil and gas industry has faced,” Aramco CEO Amin Nasser said Tuesday.

President Donald Trump warned Monday that Iran would be hit “twenty times harder” if it attempted to halt oil flows through Strait.

“If Iran does anything that stops the flow of Oil within the Strait of Hormuz, they will be hit by the United States of America TWENTY TIMES HARDER than they have been hit thus far,” Trump said in a post on Truth Social.

Traders bet on traffic resumption

For now, markets appear to be betting the situation cannot last long and that navigation through the Strait will ultimately be restored, said Bob McNally, president at Rapidan Energy Group.

“I think there’s a lot of optimism in the market,” McNally said. “We saw that today with the collapse in oil prices on what we used to call verbal intervention from the president.”

The market is still struggling to process the scale of the disruption, McNally said. Traders assumed for decades that no country would be allowed to shut the Strait. The fact that it has happened at all is “completely calamitous and unexpected,” the analyst said.

While Trump’s comments have lifted markets, Andy Lipow, president of Lipow Oil Associates, said it was too early to draw concrete conclusions.

“We will have to wait and see how Iran responds to the President’s comments and whether or not Iran will attack any oil infrastructure in the coming hours,” he said.

— CNBC’s Emma Graham, Eamon Javers, and Joseph Wilkins contributed to this report.