UK stock markets rose on Wednesday despite continuing energy price volatility over fears the US-Israel war with Iran may drag on.
In London, the FTSE 100 index edged up alongside rises on markets in Germany and France, contrasting with Asian shares which fell for a third day.
Oil prices increased by more than 1% to about $83.50 a barrel, as Saudi Arabia’s defence ministry reported an attempted drone attack on the Ras Tanura oil refinery – the second time this week it has been targeted.
David Miles, committee member at the Office for Budget Responsibility, the government’s independent forecaster, said if oil and gas prices remain elevated, it would add to inflation in the UK.
However, he said it was important to note the increases were “nowhere near as large” as those seen after Russia launched its full-scale invasion of Ukraine four years ago.
“If prices stayed where they were at the moment, probably we’re talking about an impact on the level of prices in the UK maybe of 1% or so,” Miles said.
Brent crude prices have jumped by 15% since Israel and the US began bombing Iran on Saturday and Tehran responded by attacking neighbouring Arab countries.
At the same time, one of the biggest producers in the world state-run QatarEnergy suspended production of Liquified Natural Gas (LNG).
Gas prices continued to be volatile on Wednesday, hovering around 127p per therm by midday, below Tuesday’s high of 170p.
Around a fifth of the world’s oil and gas usually flows through the Strait of Hormuz – a narrow waterway between Iran and the United Arab Emirates (UAE).
But traffic through the Strait of Hormuz has almost entirely halted following Iran’s threats to “set fire” to ships.
