Fears of US conflict with Iran send oil prices to record highs

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The Independent Online

Crude oil prices hit a record high of $68.93 per barrel in London as tension rose over Iran's nuclear programme and amid continuing disruptions to oil supplies in Nigeria, Africa's biggest exporter of oil. The cost of Brent crude breached the previous all-time high of $68.89, the peak reached on 30 August when Hurricane Katrina battered oil facilities in the Gulf of Mexico. In New York, oil prices jumped $1.35 to $68.74, below the historic peak of $70.85 touched on 30 August.

While the White House is still warning Iran about its uranium enrichment programme, which Washington and its Western allies believe hides a nuclear weapons programme, President George Bush went out of his way to play down reports of a planned military strike against Iran. The Washington Post and New Yorker magazine have reported that the White House is studying options for military strikes against Iran's nuclear facilities.

Mr Bush described such reports as "wild speculation" and insisted the US wants to settle the nuclear crisis through diplomacy. "The doctrine of prevention is to work together to prevent the Iranians from having a nuclear weapon," he said at Johns Hopkins University in Washington. Iran, the world's fourth-biggest oil producer with an output of 4 million barrels a day, says its nuclear programme is for peaceful purposes.

Markets were also anxious over problems in Iraq, which remains embroiled in insurgency, and Nigeria, where production has been attacked by militants.

The surge in oil prices came as UK figures showed raw materials costs rose at their slowest annual rate in nearly half a year in March, providing relief to hard-pressed manufacturers.

Pressure on profit margins has eased as input prices rose a modest 0.3 per cent between February and March while the annual rate fell to 13.2 per cent from 15 per cent in February. Manufacturers were able to pass on some of their cost increases to customers. Prices at the factory gate increased for the third month in a row, up 0.3 per cent on the month, while the annual rate slowed to 2.5 per cent from 2.9 per cent. Inflation for producers does threaten to pick up again in coming months if the rise in the oil price is sustained or if gas prices rise again.

Meanwhile, separate reports showed house price inflation slowed in February and like-for-like retail sales dropped 1.4 per cent in March, due mainly to late Easter and cold weather. The Office of the Deputy Prime Minister released surprisingly weak figures showing a slowdown in annual house price inflation to 3.6 per cent in February from 4.3 per cent the month before.