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Oil prices have rocketed to their highest level since 2022 as reports suggest US President Donald Trump is preparing for an escalation of the Iran war with further military action.
The cost of benchmark Brent crude soared past 126 US dollars (£94) a barrel at one stage, up nearly 7%, reaching a high not seen since Russia’s invasion of Ukraine in 2022.
Brent crude later stood at just over 122 dollars a barrel.
The latest spike comes as hopes were dashed of a resolution to the war and the reopening of the crucial Strait of Hormuz shipping route because peace talks between the US and Iran are said to have broken down.
It is reported that Mr Trump has rejected Iran’s proposals to reopen the strait and is preparing to launch a series of strikes on Iran, which would bring an end to a fragile ceasefire.
There were heavy falls overnight on Asian markets due to the speculation, with the Nikkei 225 in Japan and the Hang Seng both down by over 1%.
The surge in oil prices will lead to further fears over price rises at the petrol pumps, with worries the global energy shock will feed through to a sharp increase in UK inflation if the Middle East conflict rages on.
The Bank of England is set to announce its latest decision on interest rates at noon, with expectations for borrowing costs to remain on hold, but experts have said a hike could still be on the cards if the conflict continues to put pressure on UK inflation.