The price of oil has hit its highest level since November 2014, reaching $80 per barrel, as geopolitical fears cause concerns to rise over potential disruption to supplies. Brent crude futures, the international benchmark, have risen by around half in the past year. The new highs have prompted warnings that drivers face soaring petrol and diesel costs. Prices are at levels that will eat into the appetite for oil and forecasters have revised downwards their expectations for demand growth this year.

Experts said the rises would pose a challenge for central banks already coping with high inflation. “The biggest test may come in countries that are already seeing the target or above-target inflation like the UK,” Craig Erlam, the senior market analyst at Oanda trading group,

The US president’s decision to unilaterally exit the nuclear deal with Iran caused markets to price in the impact of Iranian crude exports falling. Iran produces around 4% of global oil supplies, or about 2.4m barrels a day (mb/d). The Middle Eastern producer’s exports fell by around 1.2mb/d when sanctions were last imposed in 2012. This time around will be different as the European Union has said it is determined to keep alive the deal and will not be forcing sanctions on Tehran.

The International Energy Agency, the Paris-based energy watchdog, said: “It is too soon to say what will happen this time but we should examine whether other producers could step in to ensure an orderly flow of oil to the market and offset a disruption to Iranian exports.” Saudi Arabia, the world’s biggest oil exporter, has already said it will work to fill any gap left by Iran.

Nearly 17 months of cuts by major oil-producing countries, led by Saudi Arabia and Russia, have made their mark. The curbs by the oil cartel Opec and partners have brought global oil supply and demand back into balance, to a degree that the IEA recently said it was “mission accomplished”.Together, Opec and Russia produce more than 40% of the world’s oil. Despite prices rising steadily under the restrictions, oil states have proved remarkably compliant and have not increased production as they have done during previous attempts to influence the market.

The Saudi and Russian energy ministers have forged a partnership that they say has them “united shoulder to shoulder” and “completely aligned”. Opec members are expected to meet in Vienna to discuss whether the cuts should continue beyond the end of 2018 when they are due to expire. However, that decision has been complicated by: The political and economic crises affecting the oil-rich South American country have resulted in its crude production going into freefall.

The collapse has tightened oil markets much more quickly than anticipated, experts said. The output is down so much that Venezuela has cut production even more than Saudi Arabia, Opec’s biggest producer. Iran and Venezuela are not the only sources of geopolitical instability causing oil prices to rise. “The ongoing escalation of tensions between Saudi Arabia and Iran, continuing conflicts in Iraq, Libya, Syria, and Yemen have significantly taken their toll on the region,” Mitsubishi UFJ Financial Group said. While a direct military confrontation between Iran and Saudi Arabia is seen as unlikely, any intensification of proxy conflicts in the region would undermine stability, the Japanese financial services group said.

The IEA warned that recent geopolitical events had increased uncertainty over future global oil supplies. Globally, the economy is strong, with the IMF forecasting 3.9% growth this year. Healthy economic activity had been an important factor in rising oil prices so far but observers are warning that crude is so expensive it will begin to dent demand for oil.

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