Oil prices have surged past 12 per cent after President Donald Trump threatened to bomb Iran "back to the Stone Age" last night.
By 2 pm today, the price per barrel of oil jumped to just over $112, with the stock market retreating back into the red after yesterday's gains.
Prior to the President's latest address, traders were pricing in a potential end to US military action in the Middle East.
However, this optimism appears to have dissipated after the Republican leader doubled down on plans to hit the Islamist regime "extremely hard".
Oil prices have jumped following President Trump's latest address
|GETTY / TRADING ECONOMICS
Over the past month, the global economy has entered an unprecedented period of volatility following Iran's decision to close the Strait of Hormuz.
The shipping route is essential for exporting 20 per cent of the world's exports to countries, with its closure expected to have a potential recessionary impact.
During his address, President Trump claimed the US did not need oil from the Middle East for its energy needs and told allies to intervene in an effort
He said: "To those countries that can't get fuel, many of which refuse to get involved in the decapitation of Iran, build up some delayed courage, go to the Strait and just take it."
Smoke rises from a fire, as the Israel-Iran air war continues, in Tehran, Iran | REUTERSLATEST DEVELOPMENTS
The cost of oil has surged in response to geopolitical tensions | REUTERSDavid Morrison, senior market analyst at Trade Nation, said: "Oil prices jumped sharply in volatile trade after President Trump warned that the US would intensify military attacks against Iran over the next two to three weeks.
"The front-month brent contract was still trading below resistance at $110, but front-month WTI once again broke above its own resistance level of $100 per barrel.
"There was also a shift in the futures curves of both contracts. This saw the price of oil for delivery within the next few weeks trade at a premium over spot, before dropping back significantly over the summer.
"The obvious takeaway from this is that investors expect the oil market to tighten further over the next few weeks, before loosening up six-to-eight weeks hence.
MAPPED: Where is the Strait of Hormuz? | GB NEWS"Also, the premium for brent over WTI has come in substantially, and this could be on expectations that, following comments from Mr Trump, Europe may end up increasing purchases of US-produced product.
"That may be the case in the short-term, but much depends, yet again, on how quickly the Strait of Hormuz can be made safe for seaborne cargoes."
During the escalating military conflict, Iran has targeted key energy infrastructure in Gulf States, alongside its blockade of the Strait.
Earlier this week, Chancellor Rachel Reeves asserted she was "angry" over the US decision to launch an initial strike on the Islamic Republic without considering the economic consequnces.