Oil prices have rallied to a two-year high of nearly $60 as they anticipate increasing geopolitical risks over the outcome of the Kurdish referendum for independence.

In response to Turkey’s threats of closing Iraqi Kurdistan’s export pipeline, the price of Brent climbed to a 27-month high of $59.48 Tuesday morning before declining to $58.6 by 15.13 Dubai time.

Iraqi Kurdistan went to polls on 25 September to vote on independence from the Iraqi federal government, with which it shares a contentious relationship over the production and export of oil reserves.

Nearly 85 per cent of the 650,000 barrels a day of Kurdish crude output finds a passage through Turkey to export markets.

The office of the Iraqi Prime Minister Haider al-Abadi published a note yesterday urging neighbouring countries - in a reference to Turkey - not to buy Kurdish crude and deal exclusively with the federal government at Baghdad.

A quarter of Iraqi Kurdistan’s output comes from disputed concessions in Kirkuk. A vote in favour of independence would likely create massive challenges for oil majors operating across Iraqi concessions.