The price of a barrel of crude has shot up to levels last seen in October 1990 in the aftermath of Iraq's invasion of Kuwait, touching 40 dollars in New York on Friday briefly.

As well as terrorism worries, traders are nervous over the risk of shortages of gasoline supplies in the United States this summer.

"Prices could go higher still and 50 dollars a barrel is possible should the wrong kind of headlines emerge from the Middle East," said Barclays Capital oil market analyst Kevin Norrish.

Prices in New York looked set to challenge an all-time peak of 41.15 dollars, he said.

The rising price of energy has prompted a chorus of concern from politicians and policymakers in oil-importing nations.

The chief of the International Energy Agency, Claude Mandil, warned: "A new oil shock -- that is to say prices which climb in coming weeks to the point of compromising a global economic recovery -- is possible."

But just how severe the impact will be is a moot point. Some economists argue that the world economy is more immune to high energy prices nowadays. Others, however, warn that surging oil prices still pose a serious risk to the economies of the United States, Europe and Asia.

China, now a driving force in the global economy, is growing increasingly dependent on energy imports to power its myriad factories, they note.

"Lots of people think somehow we're less dependent on oil than a few decades ago, but all the evidence shows that's wrong," said Professor Andrew Oswald at Warwick University in central England.

"Oil prices matter a lot -- oil shocks continue to be the main threat to prosperity in the western economies," said Oswald, who has researched the economic effects of high energy costs.

An important factor is that transport now is the greater use of oil in most Western nations, a trend that is likely to continue, he explained.

"We know that when the price of petroleum shoots up that really hurts output and pushes up unemployment."

It can also fuel inflation, driving up costs for many companies, particularly manufacturers and airlines.

The president of the European Central Bank, Jean-Claude Trichet, said last week that rising oil prices "may pose an upside risk to price stability."

The Bank of England also cited rising commodities prices as one of the reasons behind its decision to hike interest rates on Thursday.