Oil prices jumped to their highest since 2022 after a report that the US military is set to brief President Donald Trump on new plans for potential action in the Iran war.
Brent crude rose by almost 7% to more than $126 (£94) a barrel at one point, before falling back.
US Central Command has prepared a plan for a wave of “short and powerful” strikes on Iran to try to break the deadlock in negotiations with Tehran, news site Axios reported. The BBC has contacted US Central Command and the White House for comment.
Energy prices have been rising this week as peace talks appear to have stalled, with the key Strait of Hormuz waterway still effectively closed.
About 20% of the world’s oil and liquefied natural gas (LNG) usually passes through the strait and the conflict has sent global energy prices soaring.
Crude oil is a key ingredient in petrol and diesel, and the jump in costs since the start of the Iran war has pushed up pump prices for motorists.
In the UK, petrol currently costs an average of 157p a litre, according to motoring group RAC, which is 24p higher than before the start of the war. Diesel is at 188.5p a litre, up 46p compared with its pre-war price.
RAC head of policy Simon Williams said that while the price of petrol at the pumps has fallen, “our analysis of wholesale costs shows petrol is now more expensive for retailers to buy than at any time since the war began”.
“However diesel, which has come down by 3p a litre, is currently well below its highest wholesale price since the start of the conflict, so should fall further.”
But the potential impact is wider than just petrol and diesel prices. The UK government has warned people could face higher energy, food and flight ticket prices as a result of the war.
Some airlines have already started to raise fares or reduce flights. Fertiliser prices have also started to increase, which could have a knock-on effect on food prices.
Brent crude touched $126.31 a barrel earlier on Thursday, the highest since Russia’s full-scale invasion of Ukraine. However, the price then fell back sharply later in the day to around $114.
The current Brent futures contract for June delivery is due to expire on Thursday. The more active July contract was trading at around $109 a barrel. Futures contracts are agreements to buy or sell an asset at a set date.
The Axios report cited anonymous sources, saying the proposed wave of strikes would be likely to include infrastructure targets.
Another plan focused on taking over part of the Strait of Hormuz so that it can be reopened for commercial shipping, Axios reported, adding that doing so could involve troops on the ground.
Meanwhile, a statement attributed to Iran’s Supreme Leader Mojtaba Khamanei said that Tehran would secure the Strait of Hormuz and eliminate “the enemy’s abuses of the waterway”.
Khamanei’s statement on Thursday also said a “new chapter” for the region had been taking shape since the start of the US-Israeli war with Iran on 28 February.
The US said it would blockade Iranian ports for as long as Tehran continues to threaten vessels that try to use the Strait of Hormuz, severely disrupting global energy shipments.
Iran retaliated against US-Israeli airstrikes by threatening to attack ships in the waterway, through which about a fifth of the world’s energy usually passes.
Oil prices had surged by 6% on Wednesday following reports that Washington was preparing for an “extended” blockade of Iran.
“It does seem as though escalation in the war is back on the table, be it in the guise of the US continuing its blockade in Iran, but also reports and rumours that in order to get out of this bind, Iran may start to strike again,” said Naveen Das, senior oil analyst at Kpler.
He told the BBC’s Today programme an oil price approaching $125 is the point where businesses and politicians “start to get a bit more jittery”.
“We might start seeing maybe more headlines of trying to de-escalate again,” he added, because the increase in prices “has a knock-on effect not only on oil, but oil-related products, inflation and basically every factor of our day-to-day lives”.
Susannah Streeter, chief investment strategist at Wealth Club, said costs could remain high into next year.
“Urea shipments, used for fertiliser, are blocked and costs have rocketed for farmers around the world, who didn’t buy stocks in advance.
“The worry is that all these costs will be passed on through supply chains, pushing up the price of everyday goods, later in the year and into next year.”
The BBC understands that energy executives met Trump on Tuesday to discuss ways to limit the impact of the war on US consumers, fuelling concerns in the market about an extended disruption to energy supplies.
“The big question in my mind is how long the Trump administration can stand the economic heat,” Will Walker-Arnott, investment manager at Raymond James, told the Today programme.
“People are really beginning to worry about the inflationary impact coming through from the rise in the oil price”, he added.
Stock markets in Asia closed lower, with Japan’s Nikkei down 1.1% and South Korea’s Kospi closing 1.4% lower.
But markets in Europe were higher. London’s FTSE 100 rose 1.6%, Germany’s Dax climbed 1% and France’s Cac 40 edged up 0.1%.
Source: BBC
--Agencies
