Iraq's descent into chaos sent the oil price surging to a nine-month high today as the threat of disrupted supplies panicked markets.
Brent crude hit $114.69 a barrel — its highest since September — amid the prospect of more turmoil in the region as Sunni Islamist militants closed in on Baghdad and the US threatened military intervention.
To the north of the country, Kurdish forces have taken control of the oil hub of Kirkuk as the country faces the prospect of breaking apart.
The latest rise puts Brent on course for a 5% rise this week, its biggest weekly gain for almost a year.
Iraq is the second-largest exporter in oil cartel Opec so any break in supply is likely to have a big impact on prices — eventually hitting home for businesses in higher manufacturing costs and at the petrol pump, leading to higher inflation.
“Given the fragile state of the global economic recovery, sharply rising oil prices are the last thing the global economy needs,” CMC Markets analyst Michael Hewson said.
Spread betting firm ETX Capital said: “Prospects of a civil war in Iraq will keep oil prices uncomfortably high.” Ken Hasegawa of broker Newedge Japan added: “There have been no disruptions to oil supplies so far but people are very nervous.”
