Markets have plunged into the red after fresh strikes on Iran’s energy infrastructure have sent oil and gas prices soaring.

Brent crude is up over 6 per cent to around $114 a barrel in early trading, while gas prices in Europe and the UK have surged to their highest level since the conflict began.

Asian markets tumbled overnight, while the FTSE 100 opened 1.55 per cent lower to 10,143p as investors grow concerned about the duration of the conflict and its impact on inflation.

It came after fresh strikes on Iran’s biggest natural gas field, which it shares with Qatar, in a sign of further escalation. It is the first reported strike on Iranian energy infrastructure since the conflict started.

The rhetoric from both sides is ramping up, too. One Iranian official said the escalation meant that there would be ‘full-scale economic war’ while Trump threatened to ‘blow up’ the South Pars gas field.

Meanwhile, Qatar reported ‘extensive further damage’ after missile attacks around its liquefied natural gas (LNG) facility, the world’s largest.

That has sent wholesale gas prices in the UK, which relies on LNG imports, soaring. Before the war, prices hovered around the 80p mark, before shooting up to 140p in recent days.

This morning, UK gas prices spiked over 25 per cent to 175p a therm before easing back. Europe’s gas prices are up around 30 per cent to above €68 per MWh, the highest level in over three years. 

It will add to fears that the UK is facing its worst energy shock in decades, which will squeeze incomes in an already stagnant economy. 

Higher inflation expectations are already pushing lenders to reprice mortgage rates, with recent figures showing it will take £800 more to take out a new mortgage.

The average two-year fixed rate mortgage jumped from 4.83 per cent at the start of March to 5.3 per cent on Wednesday.

The Bank of England will meet against this volatile backdrop this afternoon but is widely expected to hold rates but traders are increasingly betting on a rate hike later this year.  

Richard Hunter, head of markets at Interactive Investor said: ‘Central banks in general will also be mindful that their accompanying comments carry the prospect of doing more harm than good. 

'They will certainly want to avoid a repeat of 2022, when Russia’s invasion of Ukraine led to rampant inflation and derailed growth following a series of interest rate hikes in response.’

The Federal Reserve kept interest rates on hold, as expected, on Wednesday as Chair Jerome Powell warned of fresh inflationary pressures.