WTI and Brent prices spiked overnight on the headlines about a US drone being shot down by Iran, and just legged higher once again following Trump's tweet warning that "Iran made a very big mistake."

“Geopolitics is helping oil bulls to make a spectacular come-back after a few days’ of directionless trading,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London.

WTI now trades at its highest since May.

This is the biggest one-day jump since the first week of January.

Oil prices are also supported by a slump in the U.S. dollar.

Will this surge in oil prices mess up the goldilocks narrative of lowflation that The Fed is banking on?