Iranians 'Harass' U.S. Navy

Updated from 9:26 a.m. EST

Oil prices initially rose past $98 Monday after reports emerged that three U.S. Navy ships were involved in a tense standoff with Iranian military vessels in the Persian Gulf over the weekend, but they recently pulled back.

According to CNN, the U.S. ships were "harassed" and received "threatening" radio transmissions from the Iranians, including a communication that included remarks to the effect that the American boats would be blown up. The report was later confirmed by the Pentagon.

No shots fired, but at least one U.S. ship was making preparations to fight, according to the report. Five Iranian ships were said to be involved in the incident, which took place in the Strait of Hormuz, a major shipping channel for Middle Eastern crude.

The event transpired just days after oil futures in New York hit $100 a barrel for the first time before retreating below the triple-digit mark. Recently, crude for February delivery was down $1.28 at $96.63. It had been as high as $98.40.

Tensions between the U.S. and Iran, who haven't had formal diplomatic ties since the 1979 hostage crisis, have been running hotter than normal for months as the Bush administration has called for sanctions against Tehran because of its nuclear research. Washington believes Iran is trying to develop atomic weapons.

Additionally, the U.S. has accused Iranian agents of fostering uprisings and attacks against American forces and their allies in neighboring Iraq. Iran has denied both charges.