An oil-price spike driven by the worsening crisis in Iraq could derail Britain’s recovery, drive up government borrowing, put household finances back under pressure, and damage global growth.
With Islamist fighters from Iraq and the Levant taking new ground on the border between Iraq and Syria on Saturday, oil analysts have warned that prices could rise by up to 30 per cent if the conflict escalates.
An increase of that scale could knock half a percentage point off GDP growth and add more than a quarter point to inflation, according to the government’s own forecaster.
Iraq is Opec’s second-biggest producer, extracting almost 3.5 million barrels a day, and is expected to provide almost two thirds of the entire increase in supply from Opec members by