Fears the attack could spiral into a wider, full-scale conflict also sent shares around the world falling and the price of safe-haven assets such as gold soaring.
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The price rises were the biggest price jumps since 2022 when Russia’s invasion of Ukraine caused a spike in energy prices.
Economists warned the attack on Iran could result in serious harm for business with one expert warning that it was a “bad shock for the global economy at a bad time.”
Iran supplies around 4 per cent of the world’s oil production, with much of it being supplied to China. Israel’s attack reportedly avoided Iran’s oil-producing infrastructure, but that could change if Tehran hits back, causing prices to rise further for longer.
“For the average consumer, they will be looking at more income uncertainty. They will be looking at higher petrol prices, and in the UK, they’re probably looking now at higher risk of taxation in October,” he told BBC radio.
UK heating bills might rise this autumn as traders flagged concerns it could also impact the flow of liquified natural gas (LNG)from the region if tensions escalate.
“However, if there is no nuclear escalation, then we think we could see oil prices settle back around $70 (£51.74) per barrel.”
Stock markets – some shares up but others hit
Defence and aerospace group BAE Systems benefitted from the attack seeing its shares move up 3 per cent as the threat of a full-scale war in the Middle East put defence industries back in the spotlight.
British Airways owner International Consolidated Airlines fell more than 4 per cent.
Many shipping firms have already issued warnings to their ships in the region to exercise greater caution. Container ships added many days to their journeys, from the Far East severely impacting key manufacturing supply chains, by re-routing via the Cape of Good Hope rather than risk missile attacks from Iran-backed Houti rebels in Yemen.
He added: “The escalation of military action adds another factor to consider for central bankers in an already complex world as they weigh up the inflationary impact of ever-changing tariff rates and a weakening outlook for jobs and growth.”
Interest rates could take longer to fall
The Bank almost certainly won’t cut rates next week anyway, but an increase in oil prices could mean mortgaged households are left waiting even longer for a cut to their housing costs.
Matthew Ryan, head of market strategy at global financial services firm Ebury, said: “The spike in oil prices also has broader implications, as it could both weigh on the global growth outlook and keep inflationary pressures higher for longer, which complicates the easing cycle among the world’s major central banks.”
Gold likely to see more investors
Gold is used as a safe investment during times of political and economic uncertainty.
“For now, the attacks add to the bullish mood in the gold market … with the situation being highly in flux, it is too early to tell whether this shock will lastingly lift prices,” said Carsten Menke, an analyst at Julius Baer.
“Should there be disruptions to oil supplies – either directly due to attacks or indirectly due to politically imposed measures – or should the conflict spread in the region, then gold could show a more lasting reaction.”
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