Escalating tensions with Iran and lower supplies from the North sea saw prices rising. Brent crude was traded at $120.38 per barrel, up 24 cents at 10.00 am IST. Reports that Iran was planning to cut of supplies to certain European nations fuelled the rally.
Continued tensions with Iran is likely to see crude prices remaining firm over the next few days.
Analysts believe that firm crude prices may hurt the global economy. The US is already witnessing a fragile recovery and the European economy is struggling to stay out of recession.
China and India too depend on imported crude, and a sharp rise could see the possibility of fueling inflation.
India and China in the past have had problems controlling inflation and rising crude prices is not good news for these countries.