Middle East tensions fuel oil speculation

4 July 2008

Tensions between Iran and Israel have continued to push up the price of oil, according to analysts.

As speculation mounts over a possible preemptive attack by Israel on nuclear facilities in Tehran, investors have rushed to buy crude oil.

Fears that Iran will block shipments through the Strait of Hormuz led many to panic buy ahead of today's Independence Day holiday in the US, as analyst James Crandell told Reuters: "On a long weekend, no one wants to take the risk of being caught short with all the tension between Iran and Israel."

Around 40 per cent of the world's supply of crude oil passes through the Strait.

US crude reached a high of $145.85 (£74.10) per barrel on Thursday, while London Brent finished above $146.

Yesterday the chancellor, Alistair Darling, warned that Britain needed to increase its production in order to combat the increasing prices and consequent inflation.