Oil prices surged on Tuesday morning amid fears that rising tensions between the Ukraine and Russia could disrupt supplies around the world, report agencies.
The price of Brent crude reached a seven-year high of $97.76 a barrel on Tuesday.
Market experts said there would be an inevitable spike to above $100 in the event of a full military invasion of Ukraine by Russia.
Brent, the international benchmark, was trading at its highest level since 2014, as military tanks and carriers were seen on the outskirts of Donetsk, the capital of one of two independent regions of Eastern Ukraine.
Russia has said its troops will engage in “peacekeeping” but the US said the country is creating a pretext for war.
Prime Minister Boris Johnson added that the “first barrage of UK economic sanctions against Russia” will be put forward on Tuesday, warning Russian President Putin is set on “full-scale invasion of Ukraine.”
Any sanctions on Russia could threaten oil supplies in the coming weeks and months.
That’s because Russia is the second largest oil exporter after Saudi Arabia. It is also the world’s top producer of natural gas.
The Ukraine-Russia crisis could have “substantial implications” on oil prices, said Sue Trinh of Manulife Investment Management.
Maike Currie, an investment director at Fidelity International, said oil could go above $100 per barrel due to a combination of the Ukraine crisis, a cold winter in the US, and a lack of investment in oil and gas supplies around the world.
“Russia accounts for one in every 10 barrels of oil consumed globally, so it is a major player when it comes to the price of oil, and of course, it’s really going to hurt consumers at the petrol pumps,” she said.
Stock markets also reacted to uncertainty on Tuesday morning.
In London, the FTSE 100 opened 1.5% down led by banking and travel-related stocks.
Ipek Ozkardeskaya, senior analyst at Swissquote, wrote: “The latest turn of events narrows the chances of a Russian pullback, and the window for diplomacy is almost shut.
“The risk off mode will likely stay on for the coming hours, but at this point it’s hard to predict what’s next.”