London Brent oil prices saw their biggest one-day rally in six months yesterday and were up another 0.3 per cent to 115 US dollars a barrel yesterday, while the price of US crude jumped to an 18-month high of just over 109 dollars a barrel.
Global stock markets have also slid into the red as investors flock to safe-haven assets, such as gold and government bonds.
The prospect of rising fuel costs knocked listed airlines, sending shares in British Airways owner International Airlines Group down 5 per cent and budget carrier easyJet 4 per cent lower.
Gold prices rose to hit a three-and-a-half month high of 1.433.85 dollars an ounce at one stage in a flight to safety as traders believe the precious metal will hold its value better in times of uncertainty.
Ishaq Siddiqi, market strategist at ETX Capital, warned that tensions in the Middle East had the potential to trigger a major disruption to oil supply, which risked throwing the global economic recovery off course.
He said: “Once filtered through to the real global economy, the increase in oil prices will put a halt to the current pace of economic momentum we are currently experiencing in major parts of the world.
“It’s plausible that Brent oil prices could be over 120 dollars a barrel in the coming days – and, if oil prices spike even higher, it wouldn’t be out of the question for the Federal Reserve to hold off on tapering stimulus measures this year.”