Talk of war pushes up oil prices on markets

OIL prices surged to their highest levels in a year yesterday, on growing market fears that America would launch an assault on oil exporter Iraq after US and British planes bombed targets there on Thursday.

Dealers said the jump was partly rumour-driven, with some expecting US President George W. Bush to deliver an ultimatum to Iraqi President Saddam Hussein next week.

“It's a case of buy the rumour and sell the fact, but we haven’t had many facts yet,” said Nauman Barakat, a trader at Fimat International Banque.

International benchmark Brent crude oil, which has already climbed more than a third this year on war fears, jumped 86 cents to $28.52 a barrel in London, its highest level since September last year.

US crude soared 74 cents to $29.72, also close to a year-high.

The US military said its warplanes attacked an air defence target west of Baghdad in the southern “no-fly” zone on Thursday in response to recent attempts to shoot down planes monitoring the zone.

Iraq said US and British planes flew 48 sorties from neighbouring Kuwait to attack civilian targets in Anbar province but added that no casualties were reported.

Bush is set to address the United Nations next Thursday to lay out his case against Iraq, and oil traders said they expected him to deliver an ultimatum to Saddam to open the country to unfettered weapons inspections or face war.

British Foreign Secretary Jack Straw said yesterday that there was a limit which can be put on the world's patience with Iraq and that military action had to be an option.