London, July 14:
A day of heightened tension across the globe pushed the cost of crude oil to a new record level of more than $76 a barrel.
Israelâ€™s military strikes against Lebanon, an escalation in the crisis over Iranâ€™s nuclear programme, a breakdown of talks between North Korea and South Korea and suspected pipeline explosions in Nigeria also gave added urgency to planned talks on energy at the G8 summit this weekend.
On the worldâ€™s energy markets, the cocktail of bad news was enough to put almost $2 a barrel on the price of Brent crude in London as the Russian president, Vladimir Putin, prepared to open the annual G8 summit in St Petersburg at a dinner tomorrow night .
Russia has put energy at the top of the agenda amid growing concerns about the risks posed to the global economy by rising prices and potential supply shortages. Tony Blairâ€™s official spokesman said at a pre-St Petersburg briefing yesterday that the G8 would be looking at practical measures to conserve energy and limit the westâ€™s reliance on fossil fuels.
The sharp rise in the oil price sent shivers through other financial markets, with the FTSE 100 index in London losing almost 100 points and the Dow Jones industrial average, the benchmark for US blue chip stocks, down by more than 70 points at lunchtime in New York.
â€œItâ€™s the perfect storm forming up in the stock markets,â€™â€™ said Peter Boockvar, an equity strategist at Miller Tabak in New York. â€œRecord oil prices, geopolitical tensions and slower growth.â€™â€™ Although the global economy has so far shrugged off the three-fold increase in oil prices since the start of 2003, economists are growing increasingly concerned that dearer energy will prompt belt-tightening among consumers and a marked slowdown in growth later this year and in 2007. Investors responded to the heightened international tension by seeking out safe havens. Bond prices rose on both sides of the Atlantic and gold rose to a six-week high of around $650 an ounce.
Oil analysts believe that geopolitical tensions, particularly in the Middle East, could send crude prices to $80 a barrel over the coming weeks. The oil cartel Opec is coming under pressure from western governments to pump more oil, but the Qatari oil minister said yesterday that supply was not the problem.