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Escalating tensions with Iran have pushed the cost of crude oil higher as fears mount that a 1970s-style jump in the oil price could send both Eastern and Western economies into recession. Iran's threat to cut off access to the Strait of Hormuz – through which 40pc of the world's oil is shipped – has provoked an angry rebuke from the US, which has the Fifth Fleet nearby.

Today, French foreign minister Alain Juppe supported the American hard line with Tehran, and urged European leaders to impose an embargo on Iranian oil exports and freeze Iranian central bank assets by the end of this month. Currently, Italy imports 13.3pc of its oil from Iran, Spain 9.6pc, Greece 34.7pc and France 4.4pc. International strains over Iran's nuclear ambitions were further exacerbated by the country staging three days of war games in the Hormuz area. However, Tehran said that increased sanctions could result in it closing off the strait, which it declared was "easier than drinking a glass of water".

But Iran's own oil supply is only part of the problem - the real threat is that disruption would halt the passage of oil from other Middle Eastern countries such as Saudi Arabia - the world's largest oil producer – and Kuwait. Qatar's liquified natural gas supplies would also be affected. Roy Jordan, of FACTS Global Energy, said: "If supply through the Strait of Hormuz is cut off, just about everybody in the East and West would be in trouble. It would disrupt major proportion of the world's oil and gas at a time when many of the world's economies are very fragile and would not be able to sustain a serious oil spike."

Mr Jordan said that its effect on Asian countries, which are driving world growth, would be devastating. China, Iran's number one customer, imports 10pc of its oil supply from Iran. "All it would take for Iran is a few mines put into sea, and ship owners and insurance companies would not go up there," said Mr Jordan. Brent crude rose $3.74 at $111.12 and Mr Jordan warned that if Iran's threat was fulfilled "there would be an instant escalation of price – we saw $147 in 2008 – and it could definitely reach that level and even higher." In 1974, after the Yom Kippur war and Iran's own embargo of its oil to countries supporting Israel, oil prices increased 400pc in six months.

However, Iranian officials have threatened to close the strait in the past but have not done so. But according to Mr Jordan if sanctions became such that Iran couldn't sell its oil then the country would have nothing to lose in its dealings with the West. "This is a situation we must avoid," he said. If no resolution is found, or hostilities break out, the International Energy Agency would have to force its members to try to make up the shortfall by releasing supplies from their reserves. But alternatives to Hormuz are few and far between. Iraq can already get its production into the Mediterranean through a pipeline across Turkey and a new Abu Dhabi pipeline is being built. This will come on stream early this year with 1m barrels of capacity, compared to the 18m that travel through Hormuz.

However, a recent article in Mashreq News, which is close to the Iranian military circles, pointed out that the new construction was "within range of Iran's missiles". Analysts suggested that while the closure of Hormuz remained a threat a premium was already priced into internationally traded crude that would slowly tick higher and higher. But if the strained supply days of the 1970s were to return, governments – including the UK's – would have to enforce demand restraint, with only essential services like ambulances and police getting access to petrol.

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