KEY POINTS:
Crude oil jumped above US$62 a barrel in New York after Iran seized 15 British naval personnel, heightening the prospect of conflict involving Opec's second-biggest producer.
Britain demanded the immediate release of the marines after the incident in the Persian Gulf.
New sanctions imposed on Iran by the
United Nations Security Council in an attempt to force it to suspend its nuclear programme also bolstered prices.
A proposal which would freeze the assets of a bank and bar some exports was approved at the weekend.
"Any time tension rises in the Persian Gulf, you have to be concerned," said Tom Bentz, an oil broker with BNP Paribas.
"Worries that Iran would take oil off the market because of the nuclear dispute have been pushing prices higher for a while now. We are in a world that can't afford to have any supply taken off the market."
Crude oil for May delivery rose US58c, or 0.9 per cent, to US$62.27 a barrel by Friday's close on the New York Mercantile Exchange.
Futures jumped to US$62.65, the highest for a front-month contract since December 26 and the highest for the May contract since March 9.
The Security Council voted yesterday on the draft resolution. The US and European governments say Iran intends to produce nuclear arms. Iran says it is pursuing an atomic programme for energy generation.
Iran has the second-biggest proved oil reserves. Almost a quarter of the world's oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf.
Prices rose in 1974 after an oil embargo that followed the Arab-Israeli war and from 1979 to 1981 after Iran cut oil exports.
The average cost of oil used by US refiners was US$35.24 a barrel in 1981, according to the Energy Department, or US$79.67 in today's dollars.
"The big bullish factor out there is the threat to supplies in the Persian Gulf," said Rick Mueller, an analyst with Energy Security Analysis in the Netherlands.
"Stories like Iran's seizure of British forces are the types of things that will send prices higher."
Global inventories have declined as the Organisation of Petroleum Exporting Countries implements an agreement to cut production by 1.7 million barrels a day.
Brent crude oil for May settlement rose US64c, or 1 per cent, to US$63.15 a barrel on the London-based ICE Futures exchange. Futures touched US$63.68 a barrel, the highest intraday price since December 8.
Increased concern about Iran comes as US refiners prepare to increase gasoline output before the summer driving season.
US gasoline demand peaks between the Memorial Day holiday in late May and Labour Day in early September.
Prices have jumped 13 per cent over the past month and are up 2.6 per cent from a year ago.
- BLOOMBERG