Global oil prices have surged at high levels at the start of the week as markets react to fears of global energy supply disruption, due to the war in West Asia and the Iranian blockade of the Strait of Hormuz.
The price of Brent crude briefly climbed close to $120 (£90) per barrel early on Monday before easing back to about $104 later in the day. Even after that pullback, prices remain sharply higher than the $93 per barrel level seen at the end of last week, reports BBC.
Gas markets have also been hit by the uncertainty. In the UK, wholesale gas prices jumped almost 25% at the start of trading to 171p per thm, before slipping back to roughly 156p.
Stock markets across Europe have also moved lower, following heavy losses earlier in Asian trading.
London’s FTSE 100 fell 1.1%, while Germany’s DAX dropped 1.6% and France’s CAC 40 declined 2%.
Financial markets are also reassessing expectations for interest rates. UK government borrowing costs rose on Monday as traders scaled back earlier bets that rates would be cut this year.
The yield on 2-year UK government bonds — a key measure of borrowing costs — climbed to 4.12%, up from 3.87%, reflecting expectations that higher oil prices could push inflation up again.
For motorists, the impact is likely to show up soon at petrol stations. Fuel prices typically lag movements in oil markets by about 2 weeks, but the rise has already begun.
Data from the RAC shows that by Friday average petrol prices had already risen by nearly 4p per litre, while diesel had climbed by around 6p per litre.
Analysts estimate that every $10 increase in the oil price typically adds about 7p per litre to the cost of fuel at the pump.
Since the conflict began less than 2 weeks ago, oil prices have jumped by more than $30 per barrel, leading to worries that the average petrol price in the UK may very well cross 140p per litre, with 150p per litre also possible if crude prices remain elevated.
