Oil prices jumped and stocks tumbled on Tuesday after Iran fired an estimated 180 missiles at Israel in retaliation for the ground invasion of southern Lebanon.
Brent crude jumped by as much as 4% to above $74 a barrel following a warning from White House officials that a strike was imminent.
It rose further, topping $75 a barrel, after Tehran launched a volley of missiles at Israel shortly before 6pm London time.
Experts are already warning that the conflict could send oil above $100 a barrel again, just as the Russian-Ukraine conflict did in 2002.
Naeem Aslam, chief investment officer at Zaye Capital markets, said: "Oil prices have surged on the back of the news that Iran is preparing a direct attack on Iran.
"However, smart money knows that the current reaction and swollen price action is nothing more than a mosquito bite, and this is because we have seen several episodes of this fireworks.
"If a real threat were to occur, we would not see these mosquito bites, which have caused the prices to rise, but in fact, we would see the price flirting near the 100-dollar price mark."
Elsewhere, global stocks tumbled and the price of gold spiked on concerns about wider escalation in the region.
Gold jumped by as much as 1.3%to $2,673 per troy ounce, near its record high.
The FTSE 100 was one of the few global stock indexes to register gains, buoyed by defence and oil stocks. BAE Systems, BP and Shell were all among the day’s biggest gainers.
FTSE 100
The UK's flagship share index, the FTSE 100, was up 67-points, at 8,303 shortly after opening this morning.
Brent crude oil futures were up 2.03%, trading at $75.05 a barrel.
Companies reporting today
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