LONDON — World oil prices surged today as a fresh flare-up between the United States and Iran rattled investors, while a selloff in chipmakers sent South Korea’s stock market plunging.

European equities were muted and the dollar was mixed against main rivals.

“While (oil) prices are still not at crisis levels, the creep upwards will ignite fresh inflationary worries and concerns about how far higher interest rates could move,” noted Susannah Streeter, chief investment strategist at Wealth Club.

“That’s being reflected in the bond markets, with yields on gilts and US Treasuries rising,” she added.

Renewed hostilities in the Middle East followed last week’s exchange of fire and came as negotiators struggle to reach a lasting peace deal to keep the crucial Strait of Hormuz open.

The United States struck Iran for the second day running today, prompting Tehran to retaliate against US allies in the Gulf, as the two sides battle over the status of the strategic waterway.

Brent North Sea crude, the international benchmark, rallied as much as five per cent today, before paring gains to trade around 3.5 per cent higher.