price of oil has reached its highest level since May last year as concerns mount over Iran’s nuclear program. Benchmark US light crude rose by $1.67 to $105.27 a barrel and Brent crude futures rose 44 cents to $120.49.

It marks the second day in a row of rises after Iran announced on Sunday oil export bans on the UK and France.

The European Union banned Iran’s oil imports from 1 July over fears it is developing nuclear weapons.

The EU wants to stem Iran’s oil revenues as part of sanctions which will restrict its ambitions to develop a nuclear capability.

However Tehran has dismissed the claims, insisting that it is using its nuclear plans to produce electricity.

Although Iran exports almost no oil supplies to the UK and France, it is retaliating against the planned sanctions and is expected to extend the ban to other European states who buy more of its oil.

Ian Taylor, chief executive of the world’s largest oil trader Vitol, said a decline in the value of the euro against the US dollar had also raised the cost of oil sales to EU countries.

“The Iranians now want the price as high as possible as they’ve got less volumes to sell,” he said.