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Iraq’s descent into chaos sent the oil price surging to a nine-month high yesterday as the threat of disrupted supplies panicked markets.
Brent crude soared to $114.69 a barrel – its highest price since last September – amid the prospect of more turmoil in the region with Sunni Islamist militants closing in on Baghdad and the US threatening military intervention.
But the gains were later pared back after the Paris- based International Energy Agency (IEA) said it did not see a short-term risk to supplies.
“Concerning as the latest events in Iraq may be, they might not for now, if the conflict does not spread further, put additional Iraqi oil supplies immediately at risk,” the agency said.
That took some of the heat out of the markets but traders remain skittish amid the escalating crisis in the country.
To the north, Kurdish forces have taken control of the oil hub of Kirkuk as Iraq faces the real prospect of breaking apart.
Further south, the main oil-exporting region is below Baghdad, where the Sunni Islamists are expected to face far stouter resistance than they have encountered up until now from the local Shia and where they have little local support.
However, the latest rise put Brent crude on course for a 5 per cent rise this week – its biggest weekly increase for almost a year.
Iraq is the second-largest exporter in the Opec oil cartel so any disruption to supply could have a big impact on prices at a time of escalating global demand.
Show all 98 1 /98In pictures: Iraq crisis In pictures: Iraq crisis Iraq Mourners burying 15 bodies in the village of Taza Khormato, near the northern city of Kirkuk
AP
In pictures: Iraq crisis Iraq A Shiite Turkman fighter from the so-called Sahwa or "Awakening" force, manning a position on the front line with insurgents led by the Isis group which has overran swathes of five provinces north and west of Baghdad
In pictures: Iraq crisis Iraq Kurdish Peshmerga fighters on their military vehicles drive towards the front lines of Mosul villages where they fight against Isis, in the Khazer area between the Iraqi city of Mosul and the Kurdish city of Irbil
In pictures: Iraq crisis Iraq Fighters of the Isis group parade in a commandeered Iraqi security forces armored vehicle down a main road at the northern city of Mosul
In pictures: Iraq crisis Iraq Shi'ite volunteers, who have joined the Iraqi army to fight against the Isis, take part in a military-style training in Basra, southeast of Baghdad
In pictures: Iraq crisis Iraq A Kurdish peshmerga fighter takes his position behind a wall on the front line with militants from the Isis group, in Tuz Khormato, 100 kilometers (62 miles) south of the oil rich province of Kirkuk
In pictures: Iraq crisis Iraq Iraqis who fled with families the violence in their home towns walk at a refugee camp near the city of Mosul
In pictures: Iraq crisis Iraq A member of the Jordanian Bedouin forces stands guard in front of the Jordanian Karameh border crossing at the Jordanian-Iraqi border, near Ruweished city
In pictures: Iraq crisis Iraq Iraqis gather at the site of a car bomb explosion in a Kurdish-majority neighbourhood of the ethnically mixed northern city of Kirkuk. The blast killed at least three people and also wounded 15 others in the northern part of the tinderbox oil hub, which lies at the centre of territory Iraq's Kurds want to incorporate into their autonomous region over the objections of Baghdad
In pictures: Iraq crisis Iraq Iraqi Kurdish forces take position near Taza Khormato
AFP/Getty Images
In pictures: Iraq crisis Iraq Kurdistan regional government president Massud Barzani greets US Secretary of State John Kerry at the presidential palace in Arbil
Getty Images
In pictures: Iraq crisis Iraq Iraqi men queue to for a medical check up as they volunteer to join the security forces at a recruitment centre in Baghdad
Getty Images
In pictures: Iraq crisis Iraq Kurdish fighters believe they are ‘facing a new reality and a new Iraq’
AP
In pictures: Iraq crisis Iraq Militants of the Isis group stand next to captured vehicles left behind by Iraqi security forces at an unknown location in the Salaheddin province. For militant groups, the fight over public perception can be even more important than actual combat, turning military losses into propaganda victories and battlefield successes into powerful tools to build support for the cause
In pictures: Iraq crisis Iraq A member of the Kurdish security forces takes up position with his weapon while guarding an oil refinery, on the outskirts of Mosul
In pictures: Iraq crisis Iraq Iraqi Turkmen stand with their weapons as they ready to fight against militants led by the jihadist, in the Iraqi city of Kirkuk
In pictures: Iraq crisis Iraq Volunteers of the newly formed "Peace Brigades" participate in a parade in the Shiite stronghold of Sadr City, Baghdad. Thousands of Shiite militiamen have paraded in Baghdad and several other cities in southern Iraq with heavy weaponry, signaling their readiness to take on Sunni militants who control a large chunk of the country's north
In pictures: Iraq crisis Iraq Iraqi security forces, loyal to Muslim Shiite cleric Moqtada al-Sadr take part in a military parade in the shrine city of Najaf, in central Iraq. International leaders and Iraq's Shiite religious elite have called on the country to unite to face off the insurgent threat, with US Secretary of State John Kerry this weekend heading to the Middle East and Europe in a diplomatic push to bring political stability to the country
In pictures: Iraq crisis Iraq Iraqi Shiite mourners carry the coffin of a Shiite militiaman killed in Muqdadiyah during his funeral procession, in the shrine city of Najaf. Militants attacked the town of Muqdadiyah, northeast of Baghdad and a key approach to Diyala provincial capital Baquba, sparking clashes that killed 30 Shiite militiamen
In pictures: Iraq crisis Iraq An Islamist fighter, identified as Abu Muthanna al-Yemeni from Britain (R), speaks in this still image taken undated video shot at an unknown location and uploaded to a social media website. Five Islamist fighters identified as Australian and British nationals have called on Muslims to join the wars in Syria and Iraq, in the new video released by the Isis
In pictures: Iraq crisis Iraq Al-Qa’ida inspired militants stand with captured Iraqi Army Humvee at a checkpoint belonging to Iraqi Army outside Beiji refinery some 250 kilometers (155 miles) north of Baghdad. The fighting at Beiji comes as Iraq has asked the U.S. for airstrikes targeting the militants from the Isis group. While U.S. President Barack Obama has not fully ruled out the possibility of launching airstrikes, such action is not imminent in part because intelligence agencies have been unable to identify clear targets on the ground, officials said
In pictures: Iraq crisis Iraq Members of the Iraqi Special Operations Forces take their positions during clashes with the Isis group in the city of Ramadi
In pictures: Iraq crisis Iraq Members of the Iraqi Special Operations Forces shoot during the clashes with the Isis gruop in the city of Ramadi
In pictures: Iraq crisis Iraq A Peshmerga unit is ready and armed on the front lines outside Kirkuk
In pictures: Iraq crisis Iraq A U.S. Geological Survey satellite image shows smoke rising from the Baiji refinery near Tikrit
In pictures: Iraq crisis Iraq A column of smoke rises from an oil refinery in Beiji, some 250 kilometers (155 miles) north of Baghdad
In pictures: Iraq crisis Iraq Iraqi men line up at the main army recruiting center to volunteer for military service in Baghdad, after authorities urged Iraqis to help battle insurgents
In pictures: Iraq crisis Iraq Iraqi Shiite women hold their weapons as they gather to show their willingness to join Iraqi security forces in the fight against Jihadist militants who have taken over several northern Iraqi cities in the southern Shiite Muslim shrine city of Najaf
In pictures: Iraq crisis Iraq Kurdish Peshmerga fighters stand next to the bed of a comrade wounded in clashes with jihadists in Kirkuk at the emergency ward of a hospital in Arbil
In pictures: Iraq crisis Iraq A Kurdish Peshmerga fighter wounded in the legs in clashes with Isis in Kirkuk is watched by a family member as he lies on a bed in the emergency ward of a hospital in Arbil
In pictures: Iraq crisis Iraq Relatives stand vigil for a Kurdish peshmerga fighter wounded in fighting as he is treated in a hospital in Irbil. Kurdish security and hospital officials said that fighting has been raging since morning between Kurdish fighters known as peshmerga and militants who are trying to take the town of Jalula, in the restive Diyala province some 80 miles (125 kilometers) northeast of Baghdad. Ethnic Kurds now control the northern Iraqi oil city of Kirkuk, moving to fill a vacuum after the flight of Iraqi soldiers. They too are battling the Sunni extremist militants
In pictures: Iraq crisis Iraq Militants attacked Iraq's main oil refinein Baiji as they pressed an offensive that has seen them capture swathes of territory, a manager and a refinery employee said
In pictures: Iraq crisis Iraq Militants from the Isis group parading with their weapons in the northern city of Baiji in the in Salaheddin province
In pictures: Iraq crisis Iraq A smoke rises after an attack by Isis militants on the country's largest oil refinery in Beiji, some 250 kilometers (155 miles) north of the capital, Baghdad. Iraqi security forces battled insurgents targeting the country's main oil refinery and said they regained partial control of a city near the Syrian border, trying to blunt an offensive by Sunni militants who diplomats fear may have also seized some 100 foreign workers
In pictures: Iraq crisis Iraq Major General Jamil al-Shammari (C), police chief of Iraq's Diyala province north of Baghdad, inspects the Mafraq police station which includes a prison where the bodies of 44 prisoners were found. An attack by militants was pushed back by Iraqi security forces in Baquba, Diyala's provincial capital within only 60 kilometres (37 miles) of Baghdad, leaving 44 prisoners dead at the Mafraq police station. Accounts differed as to who was responsible for the prisoner killings, with the security spokesman of Prime Minister Nuri al-Maliki saying the prisoners were killed by insurgents carrying out the attack, and other officials saying they were killed by security forces as they tried to escape
In pictures: Iraq crisis Iraq Iraqi men mourn over the coffin of an Iraqi soldier who was killed in the clashes with militants in northern Iraq, during the funeral procession in Najaf. More than two million Iraqis have volunteered to fight against militants from the Isis group, Iraqi Energy Minister Hussein al-Shahristani said. The government had no capacity to process any more volunteers, he adds. Isis and other Sunni fighters, including groups linked to the former ruling Baath Party, were reported that they now control swathes of northern Iraq after a lightning advance recently
In pictures: Iraq crisis Iraq Iraqi displaced people, who have fled violence in Iraq's northern Nineveh province, walk past the wreckage of military vehicles upon their arrival in al-Hamdaniyah, 76 kms west of the Kurdish autonomous region's capital Arbil
In pictures: Iraq crisis Iraq Demonstrators chant slogans as they carry al-Qa’ida flags in front of the provincial government headquarters in Mosul, 225 miles (360 kilometers) northwest of Baghdad. In the week since it captured Iraq's second-largest city, Mosul, a Muslim extremist group has tried to win over residents and has stopped short of widely enforcing its strict brand of Islamic law, residents say. Churches remain unharmed and street cleaners are back at work
In pictures: Iraq crisis Iraq Personnel from the Kurdish security forces detain a man suspected of being a militant belonging to the Isis group, in the outskirts of Kirkuk
In pictures: Iraq crisis Iraq Iraqi women walk at the site of a car bomb explosion in the mainly Shiite Sadr City district in Baghdad, which killed at least seven people and wounded 20. The blast came amid a week-long militant offensive in which insurgents have seized vast swathes of territory in northern Iraq
In pictures: Iraq crisis Iraq A member of the oil police force stands guard at Zubair oil field in Basra
Reuters
In pictures: Iraq crisis Iraq An Iraqi man with a boy inspects the scene of a car bomb attack in Sadr city
EPA
In pictures: Iraq crisis Iraq Iraqi Shiite tribesmen parade with their weapons in central Baghdad's Palestine Street as they show their willingness to join Iraqi security forces in the fight against Jihadist militants who have taken over several northern Iraqi cities. Faced with a militant offensive sweeping south toward Baghdad, Prime Minister Nuri al-Maliki announced the Iraqi government would arm and equip civilians who volunteer to fight, and thousands have signed up
In pictures: Iraq crisis Iraq Iraqi men queue at the entrance of a volunteer centre in Karbala city
EPA
In pictures: Iraq crisis Iraq Members of the Shiite Muslim Mehdi Army militia, take part in training in the southern Iraqi city of Basra. Iraqi Shiite volunteers, who had been fighting in neighbouring Syria, have been heading home to battle an offensive that has brought militants to near Baghdad, the Syrian Observatory for Human Rights said
In pictures: Iraq crisis Iraq An injured fighter (C) from the Isis group after a battle with Iraqi soldiers at an undisclosed location near the border between Syria and Iraq
In pictures: Iraq crisis Iraq Fighters from the Isis aiming at advancing Iraqi troops at an undisclosed location near the border between Syria and Iraq
In pictures: Iraq crisis Iraq Fighters from the Isis group taking position at an undisclosed location near the border between Syria and Iraq
In pictures: Iraq crisis Iraq Fighters from the Isis group inspecting vehicles of the Iraqi army after they were seized at an undisclosed location near the border between Syria and Iraq
In pictures: Iraq crisis Iraq Iraqi men flash victory signs as they leave the main recruiting center to join the Iraqi army in Baghdad
AP
In pictures: Iraq crisis Iraq Refugees queue to register at a temporary camp in northern Iraq
Getty Images
In pictures: Iraq crisis Iraq Newly-recruited Iraqi volunteers, wearing police forces uniforms, take part in a briefing at a training centre in Karbala
Getty Images
In pictures: Iraq crisis Iraq Kurdish peshmerga forces keep guard around Tal Afar of Mosul
Getty Images
In pictures: Iraq crisis Iraq One Iraqi captive, a corporal, is reluctant to say the slogan, and has to be shouted at repeatedly before he obeys
Sky News
In pictures: Iraq crisis Iraq Iraqi captives held by the extremists
Sky News
In pictures: Iraq crisis Iraq Iraqi captives held by the extremists
Sky News
In pictures: Iraq crisis Iraq Shiite tribal fighters raise their weapons and chant slogans against the Isis group in the northwest Baghdad's Shula neighborhood
In pictures: Iraq crisis Iraq Tribal fighters carry their weapons as they take part in an intensive security deployment in Dujail, north of Baghdad
In pictures: Iraq crisis Iraq Iraqi soldiers watch as armed tribesmen gather to show their willingness to join Iraqi security forces in the fight against Jihadist militants who have taken over several northern Iraqi cities in the southern city of Basra
In pictures: Iraq crisis Iraq Shiite tribal fighters raise their weapons and chant slogans against the Isis group in the northwest Baghdad's Shula neighborhood
In pictures: Iraq crisis Iraq Mehdi Army fighters loyal to Shi'ite cleric Moqtada al-Sadr march during a military-style training in the holy city of Najaf. The United States said it could launch air strikes and act jointly with its arch-enemy Iran to support the Iraqi government, after a rampage by Sunni Islamist insurgents across Iraq that has scrambled alliances in the Middle East
In pictures: Iraq crisis Iraq Volunteers, who have joined the Iraqi Army to fight against the predominantly Sunni militants from the radical Isis group, gather with their weapons during a parade on the streets in Basra, southeast of Baghdad
In pictures: Iraq crisis Iraq An Iraqi young boy holds a weapon from the window of a car as people gather to show their readiness to join Iraqi security forces in the fight against Jihadist militants who have taken over several northern Iraqi cities in the capital Baghdad
In pictures: Iraq crisis Iraq Tribal fighters from Ramadi hold up their weapons as they shout slogans in support of Iraqi security forces in Kerbala
In pictures: Iraq crisis Iraq Iraqi security forces fire artillery during clashes with Sunni militant group Isis in Jurf al-Sakhar
In pictures: Iraq crisis Iraq Iraqi security forces fire artillery during clashes with Sunni militant group Isis in Jurf al-Sakhar
In pictures: Iraq crisis Iraq Ammar al-Hakim, leader of Iraq's largest Shiite party, the Supreme Islamic Iraqi Council, exercises a shooting drill in the main army recruiting center in Baghdad. Thousands of Shiites from Baghdad and across southern Iraq answered an urgent call to arms, joining security forces to fight the Islamic militants who have captured large swaths of territory north of the capital and now imperil a city with a much-revered religious shrine
In pictures: Iraq crisis Iraq An Iraqi security officer stands guard outside the Church of the Virgin Mary in the northern town of Bartala, east of the northern city of Mosul as some Iraqi security stayed in the town to protect the local churches and community
In pictures: Iraq crisis Iraq The insurgent offensive that has threatened to dismember Iraq spread to the northwest of the country, when Sunni militants launched a dawn raid on a town close to the Syrian border, clashing with police and government forces
In pictures: Iraq crisis Iraq Volunteers walk with their weapons during a parade in the streets in Al-Fdhiliya district, eastern Baghdad
In pictures: Iraq crisis Iraq A volunteer, who has joined the Iraqi Army to fight against predominantly Sunni militants from the radical Isis group, holds a weapon during a parade in the streets in Al-Fdhiliya district, eastern Baghdad
In pictures: Iraq crisis Iraq Militants of the Isis group force captured Iraqi security forces members to the transport
In pictures: Iraq crisis Iraq Militants of the Isis group transporting dozens of captured Iraqi security forces members to an unknown location in the Salaheddin province ahead of executing them
In pictures: Iraq crisis Iraq A major offensive spearheaded by Isis but also involving supporters of executed dictator Saddam Hussein has overrun all of one province and chunks of three others
In pictures: Iraq crisis Iraq Militants of the Isis group executing dozens of captured Iraqi security forces members at an unknown location in the Salaheddin province
In pictures: Iraq crisis Iraq A women and a girl wash at a tap at a temporary displacement camp set up next to a Kurdish checkpoint in Kalak. Thousands of people have fled Iraq's second city of Mosul after it was overrun by Isis (Islamic State of Iraq and Syria) militants. Many have been temporarily housed at various IDP (internally displaced persons) camps around the region including the area close to Erbil, as they hope to enter the safety of the nearby Kurdish region
In pictures: Iraq crisis Iraq Families arrive at a Kurdish checkpoint next to a temporary displacement camp in Kalak
In pictures: Iraq crisis Iraq An Iraqi refugee girl from Mosul stands outside her family's tent at Khazir refugee camp outside Irbil, 217 miles (350 kilometers) north of Baghdad, Iraq. Days after Iraq's second-largest city fell to Isis fighters, some Iraqis are already returning to Mosul, lured back by insurgents offering cheap gas and food, restoring power and water and removing traffic barricades
In pictures: Iraq crisis Iraq Civilians escape from Mosul and come to a region that close to Erbil city and are placed to camp by United Nations and Kurd government in Iraq
In pictures: Iraq crisis Iraq Young men in Baghdad chant slogans against Isis outside the main army recruiting centre yesterday, where they are volunteering to fight the extremist group
Karin Kadim/AP
In pictures: Iraq crisis Iraq Volunteers who have joined the Iraqi Army to fight against the predominantly Sunni militants, who have taken over Mosul and other Northern provinces, board an army truck in Baghdad
In pictures: Iraq crisis Iraq Isis militants taking position at a Iraqi border post on the Syrian-Iraqi border between the Iraqi Nineveh province and the Syrian town of Al-Hasakah
In pictures: Iraq crisis Iraq Isis rebels show their flag after seizing an army post
AFP/Getty Images
In pictures: Iraq crisis Iraq Isis militants waving an Islamist flag after the seizure of an Iraqi army checkpoint in Salahuddin
Getty Images
In pictures: Iraq crisis Iraq A girl, who fled from the violence in Mosul, carries a case of water at a camp on the outskirts of Arbil in Iraq's Kurdistan region
In pictures: Iraq crisis Iraq A displaced Iraqi woman washes her family's laundry as the children shower outside their tent at a temporary camp set up to shelter civilians fleeing violence in Iraq's northern Nineveh province in Aski kalak, 40 kms west of the Kurdish autonomous region's capital Arbil
In pictures: Iraq crisis Iraq Iraqi refugees from Mosul arrive at Khazir refugee camp outside Irbil, 217 miles (350 kilometers) north of Baghdad
AP
In pictures: Iraq crisis Iraq Refugees flee Mosul
AP
In pictures: Iraq crisis Iraq Iraqi families fleeing violence in the northern Nineveh province gather at a Kurdish checkpoint in Aski kalak, 40 kms West of Arbil, in the autonomous Kurdistan region
In pictures: Iraq crisis Iraq Refugees fleeing from Mosul head to the self-ruled northern Kurdish region in Irbil, Iraq, 350 kilometers (217 miles) north of Baghdad
AP
In pictures: Iraq crisis Iraq An Iraqi woman carries her property while fleeing from Mosul to Arbil and Duhok due to the clashes between security forces and militants of Isis in Arbil
In pictures: Iraq crisis Iraq Iraqi people receive water as they flee from Mosul to Arbil and Duhok
In pictures: Iraq crisis Iraq A woman carries a child as families fleeing the violence in the Iraqi city of Mosul wait at a checkpoint on the outskirts of Arbil, in Iraq's Kurdistan region. Radical Sunni Muslim insurgents seized control of most of Iraq's second largest city of Mosul, overrunning a military base and freeing hundreds of prisoners in a spectacular strike against the Shi'ite-led Iraqi government
In pictures: Iraq crisis Iraq An Iraqi man and his wife flee from Mosul to Arbil and Duhok
In pictures: Iraq crisis Iraq The residents gather at a security checkpoint between the provinces of Irbil and Duhok which is controlled by Kurdish Peshmerga troops
In pictures: Iraq crisis Iraq Uniforms reportedly belonging to Iraqi security forces scattered on the road
AFP
In pictures: Iraq crisis Iraq An armoured vehicle belonging to Iraqi security forces in flames, after hundreds of militants from the Isis group launched a major assault on the security forces in Mosul, some 370 km north from the Iraqi capital Baghdad
In pictures: Iraq crisis Iraq Civilian children stand next to a burnt vehicle during clashes between Iraqi security forces and Isis group in the northern Iraq city of Mosul
Eventually that will hit home in the UK, with businesses facing higher costs and households seeing increases in the price paid at the petrol pump. That will lead to higher inflation, potentially hastening an interest rate rise.
“Given the fragile state of the global economic recovery, sharply rising oil prices are the last thing the global economy needs,” Michael Hewson, at CMC Markets, said.
“Prospects of a civil war in Iraq will keep oil prices uncomfortably high, although for the moment these tensions have been confined to the north of the country,” said the spread-betting firm ETX Capital. Ken Hasegawa of the broker Newedge Japan added: “There have been no disruptions to oil supplies so far, but people are very nervous.”
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