European Union governments agreed on 4 January to ban imports of Iranian crude, but have yet to decide when the embargo start.

News of the preliminary agreement sent crude oil prices to $114 on Wednesday, up by more than a dollar. It comes after Iran began a 10-day exercise of test-firing several missiles near the Strait of Hormuz.

EU leaders hope the ban will put pressure on Tehran to abandon its nuclear programme, but Tehran maintains its aims are peaceful, that they are developing nuclear energy to help meet growing demands for electricity rather than developing an atomic bomb.

On 31 December 2011, the US imposed new sanctions aimed at cutting off financial institutions that work with Iran’s Central Bank from the US financial system. This effectively blocks off the main source of Tehran’s payments for crude oil.

Iran supplies about 450,000 barrels of oil a day to the EU member states.