Oil refinery 1

Oil prices have risen after Saudi Arabia cut diplomatic ties with Iran, sparking concerns over supply.

Brent crude oil rose 3% before settling at $38.10 per barrel on the day. US crude rose 2% to $37.81 per barrel.

Diplomatic ties were cut when Iran promised "quick consequences" after Saudi Arabia executed pro-democracy cleric Sheikh Nimr al-Nimr. The Saudi embassy in Iran was ransacked in protest.

Saudi Foreign Minister Adel al-Jubeir then warned Iranian officials that they had 48 hours to leave the country.

Despite the initial concerns that the tensions between Iran and Saudi Arabia would impact on the supply of oil, analysts suggesting that between 500,000 and two million barrels of oil more than is required to meet demand is being produced every day.