The price of oil moved higher on Tuesday amid caution from investors ahead of Donald Trump’s deadline for Iran to agree to reopen the Strait of Hormuz.
The US president has threatened to launch a major attack on Iranian infrastructure if a ceasefire deal is not reached by 1am UK time on Wednesday.
He stepped up the threats on Tuesday afternoon, writing on his Truth Social platform that “a whole civilisation will die tonight” if Tehran does not end its blockade of the strait.
Global financial markets were tentative ahead of the deadline as a result.
The price of Brent crude oil increased by around 1.5% to 111.4 dollars a barrel in early trading and remained around that level throughout the day.
It is around 53% higher than before the conflict started at the end of February, and has resulted in sharp increases in petrol and diesel costs as a result.
Traders are still hopeful a diplomatic breakthrough can be secured but have seen little headway from recent peace talks.
In London, the FTSE 100 opened a touch higher but quickly swung into the red.
Losses deepened throughout the day and by closing, the index was down by around 0.8% to close 87.5 points lower, at 10,348.79.
Elsewhere, the German Dax index fell by about 1%, while the French Cac 40 managed to hold onto gains of around 0.7%.
Richard Hunter, head of markets at Interactive Investor, said: “In the immediate term investors are facing a binary event – ceasefire or further escalation of the conflict.
“Asian markets provided little direction overnight, leading to a subdued UK mood although the main indices made cautious progress in opening exchanges.
“The FTSE 250 remains down by 3.4% so far this year, weighed down by a cocktail of domestic economic issues and the more general risk-off approach which has blighted other global markets.”
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