The oil price has climbed above $80 a 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 motorists’ fuel bills.
However, it 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 multibillion-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 oil-exporting nations.
The Bank of England noted last week that oil prices were up by 13% 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 since November 2014.
Since then it has fallen sharply, sliding below $30 at the start of 2016 on the combination of a supply glut – partly thanks to US shale oil production – and weakness in some economies lowering demand.
But an agreement between oil-producing countries to restrict supplies has helped push the price back up.
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A report by the International Energy Agency on Wednesday warned that the rising price could hit demand.
However analysts at Goldman Sachs said that even with such a slowdown, and rising US shale production, supply problems would remain – pointing to production losses in Iran as well as Venezuela and Angola.