Motorists are being warned of further pain at the pumps as simmering tensions between the west and Iran threaten to push up petrol and diesel prices.
Moves by Iran to stop sending oil to the UK and France pushed the price of crude to a nine-month high yesterday.
Iran reacted after the European Union imposed sanctions on it amid fears it is trying to develop nuclear weapons.
Benchmark oil for March delivery was up more than 1.5% to $104.92 per barrel on the New York Mercantile Exchange, its highest since May.
This helped the FTSE 100 Index to rise 0.6% in early trading, with oil giant BP among the biggest risers, up nearly 2%. Its shares pushed above 500p at points yesterday, their highest level for a year.
But the escalation in oil prices spells bad news for motorists, already struggling with record diesel prices of 143.05p a litre.
Last night the AA said that market speculation based on the uncertainty thrown up by Tehran was likely to result in motorists paying more for their fuel.
A spokesman added: “I just hope the markets are going to listen to what they are being told by companies like Total, which is sourcing other supplies from Saudi Arabia. There is no basis for an increase.”
Oil prices have also risen because of hopes that demand will improve as the world economy recovers.
The EU imposed tough sanctions against Iran last month, which included a freeze of the country’s central bank assets and an oil embargo, which is set to begin in July.
The 27 nations in the EU account for about 18% of Iran’s oil exports.
Iran denies it is trying to develop nuclear weapons and claims it is only to generate power.
Further rises in prices at the pumps would deal a blow to hopes that inflation will continue to fall in 2012, and deal a further blow to struggling households.
UN nuclear inspectors arrived in Iran yesterday in the latest push to hold talks about how far the country’s controversial nuclear programme has come.
The trip is the second in less than a month by the International Atomic Energy Agency (IAEA) team, reflecting growing concerns over alleged weapons experiments – something Iran has so far both denied and refused to discuss.
Herman Nackaerts, a senior UN nuclear official, said he was hoping for progress in the talks.