Oil climbed past $85 on Tuesday for the first time since the US and Iran agreed to extend their ceasefire as the intensifying battle for control of the Strait of Hormuz rattled global energy markets.

Brent crude, the international benchmark, rose 2.8 per cent to $85.64 a barrel, extending gains made on Monday when prices surged almost 10 per cent. The higher oil price reverberated across global markets, hitting stocks and bonds amid fears of a renewed inflation shock.

UK government borrowing costs climbed back above 5 per cent for the first time since May, with the 10‑year gilt yield at 5.03 per cent. The 10‑year Treasury yield rose to 4.63 per cent. The Stoxx Europe 600 slipped 0.4 per cent, down almost 2 per cent over the week, while the S&P 500 fell 0.8 per cent and the Nasdaq 1.6 per cent on Monday.

“Rising tensions in the Middle East are dominating markets,” said Mohit Kumar, a strategist at Jefferies. The strait has become an explosive flashpoint between Washington and Tehran, with both sides claiming control of a waterway critical to global oil and gas supply. US forces struck Iran overnight, the sixth wave of attacks since Donald Trump resumed air strikes last week in retaliation for Iran hitting commercial vessels. Trump said the US would reinstate its naval blockade and charge a 20 per cent fee on cargo moving through the contested waterway, a move that “the very spectre of tolls will make markets nervous,” according to Jim Reid of Deutsche Bank.