LONDON – Islamist militant gains in Iraq sent world oil prices higher yesterday, sparking concerns that this could hurt global economic growth, especially in Europe where the recovery seems to be faltering, according to a report from CNN Money. Crude oil prices in London and New York touched levels not seen since last September after militants from the Islamic State in Iraq and Syria (ISIS) seized city after city over the weekend as they continued their march toward Baghdad.

Costlier energy could spell trouble for European economies still struggling to regain momentum after the region's debt crisis. Growth in the Eurozone has slowed to its weakest pace in six months, according to a June survey of purchasing managers released this week. Companies across manufacturing and services reported higher input prices.

"Both sectors reported higher oil prices as a key cause of rising costs," survey compiler Markit noted to CNN Money.

The rapid advance of ISIS across northern and western Iraq this month has had little effect so far on exports of crude oil from OPEC's second biggest producer. But prices have risen above $107 a barrel on the Nymex on fear that supplies could be hit later this year, just as world demand peaks. Prices are up 16% so far this year.

Even if ISIS is prevented from pushing into southern Iraq, which produces the vast majority of the country's 2.5 million barrels per day of exports, energy experts say output could fall back as foreign oil companies withdraw staff due to security concerns.

World growth forecasts have already been cut for 2014, in part due to the deep winter freeze which caused the U.S. economy to shrink in the first quarter.
Further sustained gains in oil prices could make for a weaker rebound in the second half. And it's not just major Western economies that would feel the pinch.