Oil prices have continued to rise after US President Donald Trump threatened Iraq with sanctions if the country expels American troops.
Gold also hit a seven-year high as investors seek shelter from mounting tensions in safe haven assets.
The precious metal climbed to $1,576.85 per ounce – its highest price since April 2013.
Benchmark Brent crude added as much as 1.95 per cent this morning, taking it to $70.04 (£53.54) per barrel, while West Texas Intermediate rose 1.87 per cent to $64.22.
Today’s gains mark the first time Brent crude has crossed the $70 threshold since September.
The rises extended a surge of over three per cent on Friday after a US airstrike in Iraq killed top Iranian military commander Qassem Soleimani, raising concerns that unrest in the Middle East could disrupt oil supplies.
The region accounts for almost half of the world’s oil production, and a fifth of the world’s oil shipments pass through the straight of Hormuz.
Speaking to reporters yesterday, Trump said that if US troops were asked to leave Iraq and this was not done on a friendly basis, “we will charge them sanctions like they’ve never seen before ever”.
“We have a very extraordinarily expensive air base that’s [in Iraq]. It cost billions of dollars to build, long before my time. We’re not leaving unless they pay us back for it,” Trump said.
Iran has vowed “severe revenge” over the assassination of Soleimani.
“The big uncertainty now for markets is how Iran will respond to this attack,” ING analysts said in a note.
“While clearly, the latest developments put US assets in the region at risk, it also increases the risk of disruptions to oil supply in the Middle East, be it through the Iranians disrupting Strait of Hormuz oil flows, or through attacking energy infrastructure of US allies in the region.”
AJ Bell investment director Russ Mould said higher oil prices can “act as a drag on economic growth as the costs of transport and materials like plastic increase”.
“Most observers believe a much bigger spike in oil would be required to have a significant impact on the global economy. But a fully blown conflict in the Middle East could deliver such a spike and investors may now need to add this to their list of worries for 2020.”