.NEW YORK (CNNMoney.com) -- U.S. crude futures spiked over $5 a barrel in electronic trading late Tuesday on rumors that Iran fired on U.S. Navy warships.

Crude gave up most of those gains after the U.S. Navy and White House denied reports of a confrontation, according to one trader.

U.S. light crude for May delivery jumped $5.18, or about 8 percent, to $68.91 a barrel in electronic trading before settling back down to $64.03, about a dollar above Tuesday's closing price on the New York Mercantile Exchange.

"This just illustrates how this market is on tender hooks regarding the situation in the Gulf," said Andy Lebow, a broker at Man Financial in New York..