Oil prices jumped sharply higher yesterday amid increased concerns that the US will take action against Iraq and petrol prices will rise. By lunchtime Brent crude was at $28.37 a barrel, up from $27.58 on its open and touching highs not seen since the aftermath of September 11th.
The hike had a knock-on impact on shares in oil giants BP and Shell, which both jumped sharply in trading. The rise follows yesterday's comments by US Vice President Mr Dick Cheney, who issued the strongest signal yet that the US was determined to topple Saddam Hussein. The remarks had an immediate impact on the oil price, which generally rallies when there is a perceived threat to supply.
Analysts say there is now a "war premium" of around $5-6 added into the oil price and, if it rises higher, there are fears for economic growth as well as pump prices.
"In an economic environment where a recovery is far from assured, you would expect the price to be $5-6 lower than this," said Mr Alex Scott, analyst at Seven Investment Management.
The rise will cause renewed worries about higher petrol prices, and analysts said that if the price remains high, motorists could be hit.
