Brent crude on Monday touched its highest level since 2014 as oil prices increased on rising tension between the US and Iran. 

The international oil price, which has benefited from a lift in US demand and Opec supply constraints this year, rose 1.2 per cent to $75.76 after earlier hitting a session peak of $75.89, its highest level since November 2014. 

The move came after Iran’s president Hassan Rouhani warned on Sunday that US president Donald Trump would be making a “historic” mistake if the US were to withdraw from its 2015 nuclear deal with Tehran.

Mr Trump has threatened to abandon the deal, under which Iran shut down its nuclear activities. US sanction waivers expire on May 12. 

“US oil prices pushed through the $70-per-barrel mark for the first time since November 2014 amid expectations for a re-imposition of sanctions on Iran,” said Action Economics analysts.

US benchmark West Texas Intermediate was up 1.1 per cent on the day at $70.46 a barrel.

“Although oil prices have benefited from tighter supplies, a lot of risk premium has been priced in due to Trump’s threat,” said Hussein Sayed, chief market strategist at FXTM. “However, it’s challenging to know the magnitude of reimposing sanctions on oil exports from Iran. That’s why analysts’ expectations varied widely on this front. But prices may remain elevated and even reach $80 a barrel in the short run.”

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Energy stocks were the beneficiaries with the sector pushing Wall Street higher in US trading as oil major ExxonMobil jumped more than 2 per cent while oil services group Schlumberger climbed 1.7 per cent.

In Europe, the Stoxx 600 oil and gas sector was outperforming the broader European benchmark index after rising 1 per cent.

Chinese oil group Cnooc had earlier climbed 3.1 per cent in Hong Kong to its highest peak since 2015 while the energy sector added 1.6 per cent in Japan, beating the broader Topix index that made just 0.2 per cent gains. In Sydney, the S&P/ASX 200 Energy index was up 0.8 per cent.

Analysts pointed to a broader potential impact on markets if continuing oil price rises feed into US inflation data and force the US Federal Reserve’s hand on rate tightening.

“Market participants realise that the recent increase in the commodity’s price — and possibly more gains in light of the US versus Iran dispute on the nuclear deal — will have to take their toll on US inflation,” said Konstantinos Anthis, head of research at ADS Securities.

“Higher domestic inflation would be just what the Fed needs in order to tilt towards three additional rate increases in 2018,” he added.

But the oil price moves were failing to help commodity-linked currencies with both the Australian and Canadian dollars struggling to make headway against a broadly stronger greenback.

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