The government has been urged to take quick action to help the 1.7 million homes that still use heating oil and have seen prices double due to the US attacks on Iran.

These are often people in rural areas, who have seen prices for their fuel jump in some cases from 62p a litre before the war to perhaps £1.73 now.

An economist has warned that Donald Trump may have done permanent damage to the global oil market, with the UK especially vulnerable to any consequent inflation.

Mohamed El-Erian, ex-chief economist of the International Monetary Fund, told The Guardian the risk the war causes permanent harm to oil markets is being underestimated.

He said he forecast a 50 per cent chance the conflict could trigger higher inflation and interest rates this year and next.

And he warned that Britain, having failed to tackle low productivity, a heavily constrained budget and entrenched inequality over the past 10 years, is in a particularly weak position to deal with an economic shock.

He compared the UK’s situation to the US, which has high productivity, and the EU, which has less inequality, suggesting Britain could fare especially badly.

Business and money editor Karl Matchett reports:

As oil prices come up, stock markets are heading the other way.

The FTSE 100 fell more than 5 per cent last week and started this week in similar fashion, but this morning it’s a sea of green with London’s main index up 1.6 per cent and smaller companies in the FTSE 250 up almost 2 per cent.

Europe is following suit with France, Spain, Germany and Netherlands all up and that follows Asian markets surging overnight.

The super-volatile Korean Kospi soared 5.35 per cent but has had drops of nearly double that in a day recently; Hong Kong’s Hang Seng, India’s Nifty 50 and Japan’s Nikkei 225 all enjoyed strong sessions too, the latter rising up to 3 per cent.

Later on, US markets are projected to open slightly higher too.

Back in London, the biggest early riser in the FTSE 100 is housebuilder Persimmon, up 10 per cent – but that is not much to do with oil and Iran, more a strong set of results this morning placing it well for a recovery with the property market. Elsewhere, miners and finance firms such as Fresnillo, Antofagasta and Barclays are all up 5 per cent and more.

Gas prices have also plunged this morning.

UK wholesale gas prices dropped over 10 per cent to around 123p a therm as soon as trading began, the BBC reports.

This is far below the high of 171p that was hit on Monday.

It would be “utterly despicable” to allow Russia to gain financially by selling oil and gas to Europe, Ireland’s deputy premier has said.

The European Union has been phasing out its use of Russian gas and oil following the country’s 2022 invasion of Ukraine.

However, Russian President Vladimir Putin has reportedly said his country is willing to work with European customers amid an energy crisis caused by the conflict in the Middle East.

Speaking at a meeting of EU finance ministers in Brussels on Tuesday, Tanaiste Simon Harris said it was important the bloc “remains steadfast” in its view that economic sanctions on Russia are an important tool in trying to end the war on the continent of Europe.

He said: “The idea that Putin and Putin’s Russia would in any way benefit financially from a moment of conflict and pain and trauma in the Gulf region would be utterly despicable.

“It shows the importance of de-escalating the conflict in the Gulf region, and it also shows the importance of not losing focus on Ukraine and showing solidarity to our friends, to our European friends in Ukraine.”

Mr Harris said a fall in oil prices showed the “volatility” of the situation while the Irish Government keeps its response “under review”

Asked what action he wants the EU to take on energy costs, he said Europe’s energy market has become more diversified than it was in 2022 but added: “I think we still find ourselves far too reliant on other parts of the world when it comes to our energy and certainly this needs to be a sharp reminder and wake-up call about the urgency of moving towards energy independence at a European level.”

Money and Business Editor, Karl Matchett, reports:

The price of Brent crude oil has dropped back close to 9 per cent today – a breath of relief at this stage, more than a full-scale avoiding of a worst-case scenario when it comes to energy bills, inflation and beyond. Most economists and experts have been clear: the peak is less important than prolonged periods of high prices.

Staying over $100 for weeks on end would be far more damaging to the economy long term than a quick one-day spike above that point and then back down again – if indeed it is now coming back down for the longer haul.

On that note, we’ll wait and see. The drop today back to $90.50 seems to be largely down to Trump saying the conflict could soon be brought to an end but it won’t take too much to the contrary of that message to send prices back up again.

Right now, we’re still $20/barrel above where we were pre-US strikes on Iran, not far off a third higher (29 per cent) in price.

Iran’s Revolutionary Guards have said they will not allow “one litre of oil” to be shipped from the Middle East if US and Israeli attacks continue, prompting a warning from president Donald Trump that the US would hit Iran much harder if it blocked exports from the vital energy-producing region.

His comments come after Aramco reported a 12 per cent drop in annual profit mainly due to lower crude prices. It also announced it would repurchase up to $3 billion (£2.22 billion ) worth of shares in its first-ever buyback.

Political reporter Athena Stavrou reports:

A government minister has said the government’s choices on the economy “look even more correct” amid concerns the conflict in the Middle East could impact the UK’s economy.

Courts minister Sarah Sackman said the government wants a de-escalation of the conflict in an effort to reduced the “shocks” to the British economy.

“What we are seeing is a vindication of the choices that we have made as a government to build our resilience and insulate the British economy against these shocks,” she said.

“The choices the chancellor made around protecting the public finances, lowering borrowing costs, all of that puts us in a better position to withstand this.”