Oil prices rose above $100 a barrel for the first time since July on Wednesday as an escalation of hostilities in the Middle East raised fears over global supplies. Brent crude, the international oil benchmark, rose 2.1 per cent to just over $100 a barrel, topping $100 for the first time since July 24.

The rise comes as the US and Iran battle for control of the Strait of Hormuz, with the countries exchanging tit-for-tat strikes on shipping in the region. On Tuesday, US forces said they had "destroyed" five Iranian crude oil tankers. The American strikes were in retaliation for the Islamic Revolutionary Guard Corps targeting an American warship with ballistic missiles twice over the past two days, said US Central Command.

Early on Wednesday, Iran said that in response it had targeted two American vessels and eight oil tankers, "inflicting heavy damage". In addition, its Revolutionary Guards said that 10 ships that "attempted to cross the prohibited and unsafe area of the Strait of Hormuz" were targeted. The group also said it had carried out ballistic missile strikes on the US Al-Azraq air base in Jordan.

The escalation comes as traders and analysts warn of a renewed supply crunch in oil markets as countries draw down strategic reserves. The oil price hit $126 in late April during the peak of hostilities before falling back to $70 after a ceasefire agreement in early July. But it has risen steadily over the past six weeks amid continued attacks on shipping and fading hopes of a swift end to the conflict.