US sanctions on Iran drive oil prices up with experts warning costs could rise again

Donald Trump has threatened to 'ratchet' measures up to 'yet another level' in November

Oil prices have risen after US sanctions on Iran kicked in again, with global benchmark Brent Crude rising 1.4 per cent to hit $74.84, as experts warned further increases could be on the way.

Donald Trump introduced “the most biting sanctions ever imposed”, as he described them in a tweet on Tuesday, three months after he revealed he was pulling the US out of the seven-party Iran nuclear deal.

Under the deal, which must be re-certified every 90 days, Iran agreed to curtail its nuclear weapons programme in return for the lifting of economic sanctions on the Middle Eastern state.

On Monday, Mr Trump said the agreement was a “horrible, one-sided deal, failed to achieve the fundamental objective of blocking all paths to an Iranian nuclear bomb, and it threw a lifeline of cash to a murderous dictatorship that has continued to spread bloodshed, violence, and chaos”.

He added: “Since the deal was reached, Iran’s aggression has only increased. The regime has used the windfall of newly accessible funds it received under the JCPOA to build nuclear-capable missiles, fund terrorism, and fuel conflict across the Middle East and beyond."

With sanctions back in place, global oil prices starting moved upwards given that supply is likely to go down with Iran taken out of the market: it exported almost three million barrels of crude oil per day in the last month.

Fiona Cincotta at City Index some oil would “keep flowing out of the country despite the US decision because India, China and many countries in Europe oppose the US ban and are likely to continue buying Iranian oil”.

However, President Trump has warned that sanctions will “ratchet up to yet another level” in November, which means “we could well be set for a supply shock in the oil market which would trigger a sharp move higher”, according to David Cheetham at XTB Online Trading.

He added: “The complex nature of this situation means that it is not just the US and Iran that could be impacted, with the bulk of Iranian crude actually being sold to other countries.

“The issue lies in whether the US look to force allies to also shun oil from Iran, and if this occurs then there’s a real chance that OPEC will struggle to make up the lost supply and this would drive the price of oil up.”

Meanwhile, consumers felt the impact of rising oil prices again on Tuesday, when regulator Ofgem announced that it was raising the maximum amount energy companies can charge people on variable tariffs by £47 a year, blaming increased wholesale energy prices.