Pound continues to punish jittery euro; squeezing supply pulls up oil prices to highest level in two years.

Brent crude, the UK's benchmark oil price, has eased off its highs a little in the last half an hour, pulling back to $58.70 per barrel.

Overnight the price hit its highest level since July 2015 on fears of squeezing supply after Turkey threatened to close the tap on a pipeline exporting oil from the Kurdish region of Iraq in opposition to a referendum on independence. 

The pipeline has the capacity to transport 700,000 barrels per day with an average of 590,000 barrels per day exported from the region and a cut-off would cause "fairly significant" disruption on the oil market, according to ING.

With the threat of shale drillers returning to rigs in the US increasing with every price rally, many predicted that crude prices would struggle to even get this close to $60 per barrel for the foreseeable future.

Accendo Markets head of research Mike Van Dulken said this on oil's recent rally:

"Brent Crude traded a 27-month high overnight as the Kurdish referendum stokes supply concerns, while strong demand from China also aids sentiment.

"The global benchmark traded above $59.1 a barrel for the first time since July 2015, exacerbating the spread between Brent and its US counterpart, which is struggling to overcome resistance at $52.2. Despite coming off overnight highs of $59.5, Brent is holding around $59. "

The euro is continuing to struggle on forex markets after Angela Merkel opened the door to the far right in Germany's federal election, weakening her hand in coalition talks, with the pound rallying 0.5pc against the currency early on to €1.1412, its highest level since mid-July.

North Korea's sensational claim that the US has declared war on the rogue state has soured the mood on equity markets with the FTSE 100 lurching into negative territory early on. European stock indices are red across the board this morning with the CAC 40 and DAX shedding 0.2pc apiece.

By Tom Rees.

Full story at Yahoo News.