Oil prices surged by almost 20 per cent on Monday after two drone attacks wiped out more than half of Saudi Arabia’s crude supply.
The price of Brent crude jumped by nearly 20 per cent in the first few moments of trading before dropping to a 10 per cent rise, while the cost of US crude jumped by 15 per cent.
It is unclear if the surge in oil costs will lead to a spike in petrol prices for consumers.
The drones struck the kingdom on Saturday, causing tensions to rise sharply in the region.
US politicians immediately called for retaliation against Iran, which has been blamed for the strikes but which has denied involvement.
One missile struck the crucial Abqaiq processing plant which is operated by Saudi Aramco, the national oil company.
A second attack damaged the Khurais field, causing a substantial fire to take hold.
The strikes halted the output of 5.7m barrels of oil, which make up more than five per cent of the world’s daily crude supply.
Yemen’s Houthi rebels have claimed responsibility for the attacks but the US believes Iran is responsible.
“To take Saudi oil production down 50 per cent, that’s shocking,” said Jonathan Aronson, a research analyst at Cornerstone Macro.
Donald Trump said the US was “locked and loaded” for any possible conflict arising from the strikes.
“Saudi Arabia oil supply was attacked,” he said on Twitter.
“There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!”
Mike Pompeo, the secretary of state, dismissed the Houthi claim of responsibility and publicly blamed Iran for the attack.
“Tehran is behind nearly 100 attacks on Saudi Arabia while [President] Rouhani and [Foreing Affairs Minister] Zarif pretend to engage in diplomacy,” he said.
“Amid all the calls for de-escalation, Iran has now launched an unprecedented attack on the world’s energy supply.
“There is no evidence the attacks came from Yemen.”
Tehran has denied responsibility for the attacks and threatened “full-fledged war” in turn.
“Everybody should know that all American bases and their aircraft carriers in a distance of up to 2,000 kilometres around Iran are within the range of our missiles,” Amirali Hajizadeh, a Revolutionary Guard commander, said on Sunday.
The semi-official Tasnim news agency also quoted him saying that “Iran has always been ready for a full-fledged war”.
Lindsey Graham, one of the president’s key allies, said the US should consider attacking Iran’s own oil refineries.
“Iran will not stop their misbehaviour until the consequences become more real,” he tweeted on Saturday night.
Britain has struck a cautious note on the attack.
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“In terms of who is responsible, the picture is not entirely clear,” said Dominic Raab, the foreign secretary.
“This was a very serious attack on Saudi Arabia and the oil installations and it has implications for global oil markets and supply.
“It’s a very serious, an outrageous act, and we need to have a clear and as united as possible international response to it.”
Extracted from Yahoo