Rocketing global oil prices could force the Bank of England to keep interest rates higher for longer to stamp out fears of spiralling inflation, analysts have warned.

After supply cuts from producers' cartel Opec, and predictions that global energy demand will remain strong, the cost of a barrel of Brent Crude rose by well over $1 on Friday, to close at $73.93, near the all-time highs of last summer.

With commodities experts predicting the market will remain tight for the rest of the year, Karen Ward, chief UK economist at HSBC, said oil price rises could add up to 0.5 per cent to the inflation rate over the coming months: and that would mean yet more rate increases.

'Unless it's very clear that consumers are reacting to higher rates and higher prices, then the Bank of England are going to take a hard line, and there will be more rate hikes on the back of it,' she warned.

In the long term, sky-high oil costs tend to depress household spending, slamming the brakes on economic growth; but first, they push up inflation. With the Bank keen to signal that it will keep a lid on rising prices, after inflation shot up to 3.1 per cent earlier this year, David Brown, chief European economist at Bear Stearns, agreed that hawkish rate-setters could now keep borrowing costs higher, for longer.

'It's a reinforcement tool for central banks to keep the tightening bias intact,' he said. The Bank's nine-member monetary policy committee has increased rates five times since last August, and made clear it wants to keep a grip on consumers' perceptions of the rising cost of living. 'In the UK, it's the threat of inflation imagined, as much as inflation in reality,' said Brown. 'They will keep on waving this big stick about.'

A prolonged period of higher rates would raise the risk of a hard landing in the booming housing market. Economists at the Bank of America this weekend added their voices to predictions of a slowdown, saying homes were 20 per cent overvalued, and there was a one-in-five chance of a crash next year or in 2009.

There is already evidence that higher borrowing costs are causing pain for UK Plc. Analysis by accountants Ernst and Young shows UK firms issued 191 profit warnings in the first half of the year - 13 per cent higher than the same period a year ago. The impact of higher oil prices on inflation could be compounded by the rising costs of other commodities. World food prices, in particular, have shot up as farm land is gobbled up to grow subsidised biofuels, and droughts in Australia exacerbate shortages.

The summer energy price spike is also likely to frustrate the hopes of US investors for a confidence-boosting rate cut from the Federal Reserve over the next few months. Kona Haque, senior commodities editor at the Economist Intelligence Unit, predicts that the cost of oil will remain around $70 a barrel for the rest of the year, and throughout 2008, as Opec producers aim for high prices.