Oil prices have climbed towards $US100 a barrel as escalating conflict in the Middle East renews concerns about global energy supplies.

Brent crude briefly approached $US99.50 before settling at $US97.92 in the latest US session. Australian market reporting on Wednesday morning showed futures moving back towards $US99.34.

The increase has been linked to renewed military activity involving Iran and attacks affecting energy infrastructure and shipping interests in the region.

Global oil prices are especially sensitive to events that threaten production or major transport routes. Even when physical supplies continue moving, traders may add a risk premium if they believe future deliveries could be disrupted.

Wall Street declined as investors considered the potential effect on inflation and interest rates. The S&P 500 fell 0.6 per cent, the Dow Jones Industrial Average dropped 1.2 per cent and the Nasdaq Composite lost 0.3 per cent.

The yield on the 10-year US Treasury note increased to approximately 4.79 per cent. Bond yields can rise when investors expect inflation to remain elevated or believe central banks will keep interest rates higher.

Australia produces and exports energy, but local motorists are still exposed to international oil prices.

The cost of crude oil is only one component of the retail fuel price. Exchange rates, refining margins, shipping, taxes and competition between service stations also matter. However, sustained increases in global oil prices can eventually appear at Australian petrol pumps.

Higher {petrol prices} can spread through the economy because businesses pay more to transport products and operate machinery. Airlines and freight companies may also face increased costs.

This does not mean every oil-price movement will immediately generate the same change in consumer inflation. Currency movements and competition can either reduce or amplify the effect.

The Australian dollar was trading around US72.2 cents on Wednesday morning. A weaker Australian dollar generally makes oil priced in US dollars more expensive locally.

Investors should be cautious about reacting to one volatile session. Geopolitical markets can reverse quickly when negotiations progress, supply routes reopen or fears prove greater than the actual disruption.

The more important question is whether elevated oil prices persist long enough to affect business costs, inflation data and central-bank decisions.