Oil market steady amid new fears on Middle East

NERVOUS financial markets were waiting to see how Israel responds to a drone and missile attack by Iran this weekend with many traders fearing a big spike in the oil price if the cycle of violence continues.

- Simon English

The oil price was little changed today on relief that the vast majority of the projectiles were shot down before reaching their targets.

But it is up sharply from $83 just a month ago to just under $90 today, and investors worry this will hinder efforts to get inflation under control and pave the way for interest rate cuts.

Forecasters Capital Economics said: "The drone attacks by Iran on Israel mark a new and potentially significantly more dangerous phase in troubles in the region. The key risks for the global economy are whether this now escalates into a broader regional conflict, and what the response is in energy markets.