Oil jumps to above USD 101

Oil prices jumped to over USD 101 a barrel on Tuesday amid concerns that rising tensions between Western powers and Iran could lead to crude supply disruptions.  

By early afternoon in Europe, benchmark crude for February delivery was up USD 2.67 to USD 101.50 a barrel in electronic trading on the New York Mercantile Exchange.

The contract fell 82 cents to settle at USD 98.83 in New York on Friday.

Global oil markets were closed Monday for the New Year's Day holiday.

In London, Brent crude was up USD 2.70 at USD 110.08 a barrel on the ICE Futures exchange.

On Monday, Iran test-fired a surface-to-surface cruise missile, part of 10-day naval maneuvers scheduled to end Tuesday.

Iran's navy chief Adm. Habibollah Sayyari said the test showed the key oil passageway Strait of Hormuz is "completely under our control."

"The ever-growing frequency of intense saber-rattling and muscle flexing between Iran and the US should keep the markets jittery and vulnerable to sudden price jumps," analysts at JBC Energy in Vienna said.

Iran has threatened to close the strait, where one-sixth of global crude exports pass, as possible retaliation to new US economic sanctions over Iran's nuclear programme.

"Renewed rhetoric out of Iran could force another rush of geopolitical risk premium into the market," energy consultant Ritterbusch and Associates said in a report.

Optimism over survey data from China and India indicating expansion in the manufacturing and services sectors helped allay concerns about demand in emerging markets, while crude prices also benefited from a weaker dollar, which makes the commodity cheaper and a more attractive investment for traders holding other currencies.