Oil prices rose on Friday after tensions with Iran escalated following the Islamic Republic’s capture of 15 British Navy sailors. The incident comes at an important moment in the stand-off between Iran and the West over its nuclear ambitions.

The US sent a second aircraft carrier recently to the Persian Gulf, and the Iranian navy has started a week of naval exercises there.

Heightened geopolitical tensions combined with a tightening oil market have sent oil prices to new highs for the year. Crude and petroleum product inventories in the developed world are declining and US petrol demand is increasing at a stronger-than-expected pace ahead of peak summer demand. On the supply side, analysts have trimmed output forecasts from producers outside the Organisation of the Petroleum Exporting Countries.

ICE Brent for May delivery added 67 cents to $63.18 a barrel by the end of London trade on Friday, and is up more than four per cent on the week. The May Brent contract reached its highest level for the year yesterday at $63.47.

May West Texas Intermediate gained 59 cents to $62.28 a barrel in late trade on the New York Mercantile Exchange, after hitting $62.65; its highest level since December 26. “You have got a series of bullish signals for the oil price, both on the supply and demand side, and on the political side too,” said one hedge fund manager.

Nickel prices had another roller-coaster ride. After rising more than 10 per cent in the previous week, the metal, used for stainless steel production, fell more than 12 per cent from last Friday’s record high of $48,300. The three-month nickel price fell six per cent or $2,700 to $42,450 a tonne.

The slide in the nickel price was prompted by more metal flowing into warehouses registered with the LME. The increase leaves nickel stockpiles at about a day’s worth of consumption.

Copper, which led the charge in the base metal price rally 12 months ago, started to climb on tighter fundamentals. This week, analysts and one of the world’s largest copper producers, BHP Billiton, have forecast a deficit of copper in the second quarter, the peak demand period of the year for base metals.

The red metal rose $20 to $6,720 a tonne yesterday, leaving it about 10 per cent higher on the week. Robin Bhar, metals strategist at UBS, said copper fundamentals meant prices could go a lot higher. “There are a lot more people short (entities that had pre-sold copper) than there were this time last year, when copper started its run up to its record. If we have copper going towards $7,000, you will find a lot more covering, which would trigger further rises,” said Mr Bhar.

Grains markets ended the week on a downward note before an important report next week. The US Department of Agriculture will issue its first crop planting estimates of the season, with the first indication this year as to whether an expected expansion in corn acreage has occurred.

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