UK petrol prices are poised to hit a record 150p a litre later this week after the worsening tension in Ukraine added fresh pressure to the cost of living crisis facing households.

Crude oil prices reached more than $99 a barrel at one point on Tuesday in response to Vladimir Putin’s decision to recognise the independence of two breakaway regions in eastern Ukraine. Prices later slipped back after markets viewed the west’s initial sanctions response as weak.

But with Brent crude ending the day 1.6% higher at just under $97 a barrel, the RAC said motorists would quickly be paying 150p a litre for unleaded petrol and 154p a litre for diesel.

Analysts said the cost of crude – already at its highest level in seven years – was soon likely to push through the $100-a-barrel level.

Jeremy Nicholson, corporate affairs officer at Alfa Energy Group, said: “The deterioration of the situation in Ukraine and threat of military action by Russia is adding to the risk of disruption to European gas supplies, putting further pressure on UK/European wholesale gas and power prices. Oil prices are also being affected, with growing expectation oil could shortly reach or exceed $100 a barrel.”

Germany’s decision to withhold approval of the Nord Stream 2 gas pipeline drew a swift response from Dmitry Medvedev, Russia’s former president and now deputy chairman of its Security Council.

“Welcome to the new world where Europeans will soon have to pay €2,000 () per thousand cubic metres!” he tweeted – suggesting prices were set to double.

On a rollercoaster day, stock markets in Europe took their initial cue from Asia, which suffered big falls overnight after Russia sent troops into Donetsk and Luhansk.

Share prices later recouped most of their losses in London, Frankfurt and Paris after the UK imposed sanctions on five of the smaller Russian banks and on three individuals already targeted by the US.

But the risks of further turbulence on the global markets increased when the Nato secretary-general, Jens Stoltenberg, said the alliance believed Russia was planning a bigger assault on Ukraine. Western leaders in London, Washington and Brussels warned they would scale up their response if there was an intensification of Russia’s military action.

Responding to all-party criticism, Britain said it would be scaling up its response while the EU and the US also pledged to put strong economic pressure on Moscow.

The UK’s Centre for Economic and Business Research thinktank warned the crisis in Ukraine threatened to deliver a double blow of higher inflation and weaker growth.

“Any international action will likely not only add to the current inflationary binge, possibly bringing inflation close to 10% in the main western economies, but also should slow down growth quite rapidly,” it said.

The UK annual inflation rate – as measured by the consumer prices index – currently stands at 5.5% but is forecast by the Bank of England to rise above 7% by the spring.

In London, the FTSE 100 index in London closed marginally higher at 7,495.97. Germany’s Dax lost 0.4% while France’s CAC slipped 0.16%, and Italy’s FTSE MiB and Spain’s Ibex were flat.

Russian stock markets also staged a small comeback after earlier losses, with the dollar-denominated RTS index and the rouble-denominated Moex index on the Moscow exchange both rising 1.6% this afternoon.

Shares in Russia’s largest lender Sberbank rose 1.3% (after an earlier gain of 5%) while the second-biggest bank VTB was up 1.7%, after they escaped British sanctions.

Russ Mould, investment director at the investment firm AJ Bell, said:

“Moscow’s RTS index was down 3% before Olaf Scholz and Mr Johnson made their statements – and it ended the day 1.6% higher. Major gainers included Gazprom, Norilsk Nickel, Tatneft and Rusal.”

Extracted in full from: UK petrol prices poised to hit record 150p a litre soon, warns RAC | Global economy | The Guardian