Oil prices climb on heightened Middle East fears

International benchmark Brent crude was up 2% at $75.07 a barrel as at 1000 BST, while West Texas Intermediate was trading 2% higher at $71.38.

Markets and traders were reacting to renewed fears that the Middle East is on course for full-scale regional conflict, after Iran launched a ballistic missile attack on Israel overnight.

Opec-member Iran launched the barrage hours after Israel began a ground offensive against Hezbollah in Lebanon and warned of further "devastating" attacks if Israel responded.

Israeli prime minister Benjamin Netanyahu has already vowed to retaliate, however.

The Middle East accounts for just under a third of global oil production. Iran itself currently exports around 1.7m barrels of oil a day.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Oil prices are climbing as supply concerns swirl again.

"These worries are being mitigated by expectations that Saudi Arabia will turn on the taps more fully, and lower demand from China. But upward pressure is likely to continue while uncertainty reigns about just how far conflict will spread."

ING said: "While Iran has said it has concluded its actions, the market is more concerned about how Israel will now respond, something it has promised to do.

"There are several routes it could take. Significant escalation would likely involved targeting Iranian nuclear facilities and energy infrastructure, which would likely boost the risk premium priced into the oil market.

"The US will likely try to push Israel for a more modest response, wanting to avoid a signification escalation in tensions."

As at 1000 BST, UK oil majors BP and Shell had both put on 3% at 412.06p and 2,545p respectively.