OIL prices have hit a nine-month high of more than $110 a barrel following days of violence in Iraq.
The increase prompted warnings it could soon hit the cost of petrol at the pumps.
The recent turmoil in Iraq has spooked the markets, which are concerned about the outlook for future oil production.
Earlier this week, al Qaeda-inspired insurgents the Islamic State of Iraq and Levant captured a number of key cities in Iraq, including the second-largest city Mosul, in a region considered a gateway for the nation's oil.
Since then rebel Kurdish forces in the north of the country have also taken Kirkuk, another oil hub.
The motoring organisation RAC warned the disruption could add more than 2p to the price of a litre of petrol in the UK.
But rival breakdown firm the AA urged calm, saying that there was no need for retailers to bring in a "knee-jerk price rise".
Talk of petrol price increases led to fears that a prolonged conflict in Iraq could raise the price of goods imported into the UK.
There were also warnings that the oil price could rise even higher if the situation in Iraq deteriorates.
US President Barack Obama yesterday warned Iraq's government it must make a serious effort to address sectarian differences or US military help would fail to curb the insurgency. He said: "We can't do it for them."