If President Bush's real reason for rolling his tanks into Iraq was to turn on the taps of the world's second-largest oil reserves to lower the cost of energy, he must be sadly disappointed. Following this weekend's attacks by saboteurs on Iraq's main oil pipeline to Turkey, oil prices in London are nearly back to where they were as military commanders prepared the first strikes in March.

The three months since full-blown hostilities ended have been a hard lesson for markets which had hoped to see oil exports from Iraq climb swiftly towards the 2m barrels a day the US promised to deliver by the end of the year. Southern refineries have been plagued by power cuts, the north-south "strategic pipeline" had already been sabotaged, and the weekend's attacks brought exports from the north of the country to a complete standstill.

After the fragility of America's energy supply was demonstrated last week by the worst blackouts for 30 years, and with US oil reserves running at historic lows, the attackers chose their timing well. Brent crude for October delivery was trading up 35 cents a barrel yesterday at $29.16, after hitting a high of $30.34 earlier this month.

With some analysts predicting that it could take more than a month to fix the damaged pipeline, and Opec showing no signs of using reserves to cool the overheated markets, oil prices could stay at this level for some time.

"I think the only hope one has of a drop in prices would be the Opec meeting in September," said Sarah Lloyd, senior Middle East energy analyst at the World Markets Research Centre. But most analysts believe Opec's 11 members are likely to be happy to continue reaping the benefits of prices at the top end of their target range.

Leo Drollas of the Centre for Global Energy Studies said: "Iraq is helping keep prices around $28-$29, which suits producers such as Saudi Arabia, but affects oil demand growth in the long-term."

With anti-coalition guerrillas having discovered economic terrorism, few now believe the 2m barrel objective is achievable. "There are a lot of factors out there supporting the oil price right now, but the overriding question is when Iraqi production comes back," said Razia Khan, of Standard Chartered bank. A prolonged period of $30-a-barrel prices is not the prescription central bankers and finance ministers would have written for the world economy right now.

While second quarter growth in the US and Japan was stronger than expected, three of the eurozone's 12 members are in recession. The UK is the only major economy to have avoided recession since the dotcom bubble burst but it looks set to chalk up its third year of below-trend growth.

Forecasters on both sides of the Atlantic are relying on businesses to take over from consumers as the engines of growth, but with high energy prices putting the recovery in doubt, firms could rethink investment plans.

However, not everyone is pessimistic about the threat to Iraq's oil exports. David Gignoux at Citigroup said the markets overreacted to weekend pictures of the burning oil pipe - reminiscent of the mass torching of Kuwaiti oil fields in the first Gulf war.

Hawks in the Bush administration had hoped before the war that oil revenues of up to $15bn a year would offset the $4bn a month cost of keeping troops in Iraq. But far from profiting from the war by seizing a cheap source of energy, Washington is having to throw money at securing Iraq's oil sector, at a time when its finances are already showing a record deficit.