The oil price smashed through the $100 barrier for the first time since Russia’s full scale invasion of Ukraine in 2022 last night.
The price of a barrel of Brent Crude, one of the key global benchmarks for traded oil, surged more than 15% to $108 in one of the biggest one day rises on record and the largest in at least six years.
The price of a barrel of a WTI Crude, the benchmark for US oil, jumped 14% to $105.
The dramatic increases at the start of the second full week of Donald Trump’s war on Iran will intensify already heightened fears about the knock-on effects for the global economy.
Petrol prices have already jumped on UK forecourts and there are now growing concerns that the oil price spike will quickly feed through to the overall rate of inflation, delaying interest rates cuts and holding back economic growth.
President Trump has said a short-term rise in the oil price is a “small price to pay” for security.
Since the U.S. and Israel launched joint their military strikes on Iran last weekend, oil prices have recorded their largest one‑week spike since March 1983.
At one stage last night Brent crude, the international benchmark, rose as high as $119.50 per barrel – up 29% .
But it later eased on reports that finance ministers from across the G7 group of developed economies plans a possible joint release of petroleum from reserves in a bid to tackle the surge in oil prices.
The latest surge came as it was confirmed that Mojtaba Khamenei, the son of Iran’s previous supreme leader Ayatollah Ali Khamenei who was killed in US-Israeli strikes, has been chosen as his successor, suggesting there is no immediate hope of a peace deal.
It also emerged crude oil production from Iraq’s southern fields has dropped by 70% since the start of the war, with the average daily production at 1.3 million barrels, compared with 4.3 million barrels previously.
Iraq was the first major producer to cut production because of tanker traffic paralysis in the Strait of Hormuz.
Iranian officials have threatened to “attack and set ablaze any ship attempting to cross” the waterway, which is normally a key route for about 20% of the world’s oil and gas supplies.
Last week, the FTSE 100 suffered its worst week since Donald Trump’s so-called “liberation day” tariff announcements last April and further falls are expected today.