NEW YORK-Re­newed ten­sions be­tween Iran and the West pushed oil to its high­est lev­el in more than a month. Iran is again threat­en­ing to block a crit­i­cal Per­sian Gulf ship­ping route in re­sponse to a Eu­ro­pean em­bar­go of Iran­ian oil. Iran has sparred for months with the West over its nu­clear pro­gramme.

Bench­mark US crude added US$3.91, or 4.7 per cent, to end at US$87.66 per bar­rel in New York. That's the high­est price since May 30. Brent crude, which sets the price of oil im­port­ed in­to the Unit­ed States, rose above US$100 for the first time in three weeks. Brent added US$3.34, or 3.4 per cent, to fin­ish at US$100.68 per bar­rel in Lon­don.

Com­bined with a big gain on Fri­day, oil has risen by near­ly US$10 per bar­rel in less than a week. That's bring­ing an end to a pro­longed drop in pump prices. The US na­tion­al av­er­age for gas rose slight­ly yes­ter­day to US$3.30 per gal­lon, the first in­crease in more than two months.

An in­crease in US fac­to­ry or­ders from April to May al­so sup­port­ed oil prices yes­ter­day. And an­a­lysts are bet­ting that Eu­rope, Chi­na and the US will take steps to stim­u­late their economies, which would boost oil de­mand. But the main dri­ver was Iran. More than a third of the world's seaborne oil is shipped out of the Per­sian Gulf, so any move by Iran to shut the vi­tal Strait of Hor­muz rais­es the risk of a con­fronta­tion and the dis­rup­tion of tanker traf­fic. Iran has threat­ened to block the wa­ter­way since last year when West­ern na­tions im­posed fi­nan­cial sanc­tions and the Eu­ro­pean Union first pro­posed an oil em­bar­go.

The dis­pute is over Iran's nu­clear pro­gramme. The West says Iran is en­rich­ing ura­ni­um to even­tu­al­ly build nu­clear weapons. Iran de­nies the claim. Iran's ear­li­er sabre-rat­tling helped boost US oil above US$110 per bar­rel and Brent above US$125 in ear­ly March. But oil dropped 25 per cent from May 1 to June 28 as Iran de­cid­ed to en­gage in ne­go­ti­a­tions, the Eu­ro­pean fi­nan­cial cri­sis wors­ened and growth slowed in the US and Chi­na.

Now, with ne­go­ti­a­tions show­ing no progress and the Eu­ro­pean em­bar­go in ef­fect as of Sun­day, in­vestors are once again brac­ing for a re­sponse from Iran. Whole­sale gaso­line fu­tures added 9.9 cents to fin­ish at US$2.7229 per gal­lon. Whole­sale gas has risen about three per cent in the past week. In oth­er fu­tures trad­ing, nat­ur­al gas rose by 7.5 cents to fin­ish at US$2.899 per 1,000 cu­bic feet.

AP