Oil prices rise further as Iran blocks vital shipping route

Oil prices have risen further as the Middle East conflict intensified and after Iran took action to block a crucial shipping route for crude tankers.

Brent crude rose by more than another 3% on Tuesday to stand at a one-year high of 80 US dollars a barrel, having soared by as much as 13% at one stage on Monday, rising above 82 dollars a barrel, before paring back.

An Iranian official has reportedly warned tankers on the Strait of Hormuz that no ships would be allowed to pass through as part of its response to US and Israel strikes on the country.

The Strait of Hormuz is used by tankers carrying about one fifth of the world’s oil supplies and seaborne gas.

Gas prices on Monday also surged at the fastest pace since the outbreak of war in Ukraine, up 52%, after Qatar halted production of liquified natural gas after attacks by Iran.

The increases sparked warnings over sharp rises in the cost of petrol and domestic energy bills, which could take their toll on UK households in the coming months.

Financial markets were also in turmoil, with the FTSE 100 Index in London finishing Monday 1.2% lower and expected to fall further when the market opens on Tuesday.

On Wall Street, US stock markets recouped much of their losses to end the day flat on Monday, but are also predicted to fall on Tuesday in volatile trading.

It comes after US President Donald Trump’s warning that military operations against Iran could take “far longer” than its initial projection of a four-to-five-week timeframe.

The US and Israel have continued with a barrage of strikes against Iran since killing its Supreme Leader Ayatollah Ali Khamenei on Saturday.

Tehran has retaliated with strikes against Israel, and the oil and natural gas production facilities of Gulf states allied to the US.

The impact on fuel prices has already been acute, and the blockage of the Strait of Hormuz caused the cost of hiring an oil supertanker to carry crude from the Middle East to China to reach an all-time high on Monday.

In London, the conflict will hit stocks further, but also puts FTSE 100 oil giants BP and Shell in the spotlight.

Derren Nathan, head of equity research at Hargreaves Lansdown, said: “Sentiment towards BP and Shell has strengthened significantly off the back of oil price spikes.

“But it’s a complex picture. Neither company has production in Iran.

“But BP’s significant production in Iraq and Abu Dhabi risks being bottlenecked through disruption to the Strait of Hormuz.

“For Shell the same applies to its LNG facilities in Qatar and the Emirates.”