An RAF plane flying over Iraqi oilfields on 18 March

Prices fell because traders were betting that the US would have an easy victory and oil supplies would not be interrupted by the war.

Earlier, prices swung because of reports - denied by Baghdad - that three or four oil wells were on fire in the south of the country.

In London the price of North Sea Brent crude climbed to $27.50 a barrel when the oil well fires were first reported, but it fell back again to close at $25.50 after it had earlier hit a new three month low of $25.30.

In New York the price of light, sweet crude fell $1.24 to $28.12, its lowest price since mid-December.

Oil cartel's promise

Oil prices had been falling for six days because the prospect of imminent war meant there was less uncertainty. Traders were hoping for a quick war followed by a resurgence in Iraqi oil production.

Any widespread attempt to sabotage Iraqi oilfields could set back post-war reconstruction efforts Click here to read more about Iraq's oil

Once air strikes began against Iraq the slide came to a halt as comments from the US suggested the war could last longer than expected.

Reports of oil well fires pushed prices up again and then news that the US was stepping up its attacks encouraged traders to send prices back down.

When hostilities began, the oil cartel Opec repeated its promise that it would make up for any shortages in oil supplies by pumping more than its established quotas.