Iran war is creating an oil crisis bigger than the 1970s, international energy body warns

The International Energy Agency (IEA) has warned that Donald Trump’s Middle East war is plunging the world into an oil crisis far greater than that of the 1970s.

With the price surpassing $100 (£75) per barrel, the intergovernmental body said the war had ‘created the largest supply disruption in the history of the global oil market’.

In the 1970s, the West was punished with a crippling oil embargo by Arab countries angered by American support for Israel.

A horrific example of the crisis emerged earlier this week when two tankers were hit by explosives-laden Iranian boats and set on fire near the port of Basra in southern Iraq.

At least one crew member was killed. Hours ago, three more ships in the Gulf were targeted.

The IEA’s warning will raise fears of a new cost of living crunch in Britain. New figures show 93 per cent are already affected by high food bills.

Earlier this week the Chancellor hinted at possible short-term rescue packages for struggling families.

Questioned by MPs on the House of Commons Treasury committee about whether the Government could provide support, Rachel Reeves said: ‘We are working on different ways to protect people, including more targeted support.’

It came as analysts at US bank Goldman Sachs predicted oil prices could reach $150 (£112) a barrel in the event of prolonged disruption, cutting Britain’s growth forecasts for the second time since the war began less than two weeks ago.

Such a scenario is predicted to deal a major blow to UK growth, with inflation rising to 3.5 per cent.

US President Donald Trump’s latest comments, which appear to ignore the threat of higher oil prices, have done nothing to reassure markets.

He said: ‘The United States is by far the largest oil producer in the world, so we make a lot of money when oil prices rise.’

And Iran’s new leader, Mojtaba Khamenei, vowed in a statement to keep the Strait of Hormuz, which is only 34 miles wide at its narrowest and vital for worldwide oil and gas shipping, closed. The day before, the regime had warned the world to be ready for $200 (£150) oil prices.

The price of a barrel of Brent crude oil has risen to almost $120 (£90) since the start of the war due to the closure of the strait.

Meanwhile, jittery bond markets have caused UK government borrowing costs to rise to a six-month high. This is linked to fears that the Bank of England will no longer be able to cut interest rates this year as the rise in oil and gas prices fuels inflation, as well as the possibility that it may have to cover the cost of energy bill subsidies.

The IEA said flows through the Strait of Hormuz had fallen from 20 million barrels a day to a “trick”. Oil-producing countries are running out of storage capacity, prompting them to reduce pumping by at least 10 million barrels.

US President Donald Trump ignored threat that oil prices would rise

A deal brokered by the IEA this week aimed to ease supply fears by freeing up 400 million barrels of oil held by member countries, including Britain.

But Ashley Kelty, oil and gas analyst at City broker Panmure Liberum, said the move was seen as ‘inadequate’ by traders, describing it as ‘a plaster that sticks… just a plaster that makes up for supplies that have been lost for about two weeks’.

Despite the heavy bombardment of the USA and Israel, there was no sign that the Iranian regime, which attacked Iraq, Kuwait, the United Arab Emirates, Bahrain and Oman yesterday, would collapse.

Since the start of the war, the cost of a liter of petrol has risen by 7p to more than 140p, while the price of diesel has risen from 16p to 158p, according to the RAC.

Household energy bills are protected by a price cap for now, but are likely to increase in July when the cap is reviewed.

The Office for National Statistics showed that 56 per cent of adults reported their living costs had increased last month, rising to 93 per cent when asked about food stores and 69 per cent for gas and electricity bills.