The oil price has climbed above 80 dollars per barrel for the first time in three-and-a-half years amid simmering global tensions over Iran.
Brent crude has been rising in recent months as supplies tighten and the decision by Donald Trump to pull out of an international nuclear deal with Tehran has added to the upward pressure.
The rising price of oil will add to the pressure on motorists’ fuel bills. But is a welcome trend for oil companies including BP and Royal Dutch Shell, two companies which are staples of UK pension funds.
Markets have been reacting to the prospect of a sharp drop in Iranian oil exports after the US decision on the deal.
French energy giant Total said on Wednesday that it might abandon a multi-billion dollar gas project in the country if it could not secure a waiver from US sanctions, adding to doubts on European-led efforts to salvage the international nuclear agreement.
Meanwhile, global inventories of oil have dropped sharply in recent months on robust demand and production cuts by top producing nations.
The Bank of England noted last week that oil prices were up by 13 per cent this month compared to February and that this would push up petrol and diesel prices, lifting inflation over coming months.
Brent crude has not been at 80 dollars since November 2014.
Since then it has fallen sharply, sliding below 30 dollars at the start of 2016 thanks to the combination of a supply glut partly thanks to US shale oil production, and weakness in some economies lowering demand.