The price of a barrel of oil rose on Wednesday to hit a six-month high of $116.61 US for Brent crude, as the threat of Western countries involvement in the Syrian conflict stirred concerns over Middle East oil supplies.
The international benchmark has jumped more than 5 per cent in two sessions as U.S. officials sketched out plans for multi-national strikes against forces of Syrian President Bashar al-Assad, blamed for poison gas attacks last week.
During Wednesday's trading in New York, Brent crude hit a six-month high of $117.34 before falling back. Trading volume was heavy, hitting 870,000 contracts in late afternoon activity.
U.S. crude futures were lower than Brent crude, rising $1.09 to settle at $110.10 a barrel.
U.S. Defence Secretary Chuck Hagel said Tuesday that American forces were ready to act on any order by President Barack Obama to strike Syria in response to the alleged use of chemical weapons in the conflict.
The timing of any U.S. move is unclear, but oil markets were already on edge due to a steep drop in exports from Libya, where a month-long strike by armed security guards shut down the ports.
With the U.S. and EU undergoing fragile economic recoveries, it's a poor time for the world to absorb higher oil prices, according to CIBC economist Avery Shenfield.
Could hurt global economy
"The global economy certainly isn't in the most solid shape and certainly this isn't the time when you wouldn't like to see consumers around the world pinched by higher oil prices," he told CBC News.
Consumers could see higher oil prices reflected in higher gasoline prices within a few weeks, Shenfeld said.
But he expects the oil price shock will be short-term.
"If this is a one-time strike on Syria, then we expect oil prices to come back down to earth in the not too distant future," he said.
It would take a longer term rise in the price of a barrel of oil to get capital streaming into Canada's oil patch, Shenfeld said.
The sharp price rise seen in the past few weeks will result in "a bit of short term pain for consumers at the pump but unfortunately not a lot of longterm gain for the energy sector unless we see prices persisting at a higher level for longer," he added.
Traders fear conflict will spread
The price of oil is has surged more than 15 per cent in the last three months on concerns over the civil war in Syria and unrest in Egypt. Neither country is a major oil exporter, but traders worry that the violence could spread to more important oil-exporting countries or disrupt major oil transport routes.
"Syria's political-economic-military links to Iran, Hezbollah and Russia underline the threat of unintended chain-reaction resulting in wider regional instability. Threat of supply disruption is not insignificant," said Vishnu Varathan of Mizuho Bank Ltd. in Singapore in a market commentary.
In other energy futures trading on the Nymex:
Wholesale gasoline rose 5 cents to $2.96 a gallon.
Heating oil rose 5 cents to $3.21 a gallon.
Natural gas edged up a penny to $3.58 per 1,000 cubic feet..