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Oil Prices Surge as Iran Ups Threats

NEW YORK ( TheStreet) -- Oil prices surged Tuesday as Iranian missile test-fires and new threats added to concern that tension in the Strait of Hormuz may disrupt the delivery of crude oil to the U.S. and Europe.

West Texas Intermediate (WTI) light sweet crude oil for February delivery climbed $4.13 to settle at $102.96, its highest price in 10 months. The February Brent contract advanced $4.75 to $112.13.

oil

Oil surged in the first day of trading in 2012 after the test-firing of two cruise missiles by Iran on Monday. More aggressive threats Tuesday heightened fears that tensions between the Middle Eastern country and the U.S. will continue to escalate and lead to disruption in delivery of the fuel.

The missile tests came on the second-to-last day of a 10-day naval exercise scheduled by Iran to show that the Strait of Hormuz is "completely under our control," Adm. Habibollah Sayyari of the Iranian navy said. This latest show of strength comes after Iran threatened to close the strait -- through which 17 million barrels of crude oil exports travel each day -- in retaliation to new U.S. economic sanctions over Iran's nuclear program.

On Tuesday Iran, the Organization of Petroleum Exporting Countries' second-largest producer of the fuel, threatened to take further action if the U.S. moves an aircraft carrier into the Persian Gulf. U.S. led sanctions against Iran's oil industry have helped push the country's currency to its lowest level ever against the dollar in the past few weeks.

The U.S. has remained firm in its response. "The deployment of U.S. military assets in the Persian Gulf region will continue as it has for decades," said Pentagon spokesman George Little.

Oil prices were also helped higher by improving manufacturing data in the U.S., China and India that eased concerns about dwindling demand in the world's largest and fastest growing economies.

In the U.S., the Institute for Supply Management reported that its manufacturing index rose to 53.9 in December from 52.7 in November. Economists polled by Thomson Reuters expected the index to come in at 53.2. Readings of more than 50 indicate economic expansion. In Asia, India's manufacturing grew at the fastest rate in six months and Chinese manufacturing rose more than expected to reverse a decline in the prior month.

Energy shares were trading higher with the fuel. Chevron (CVX - Get Report) advanced 3.7% to $110.37. Hess (HES - Get Report) rose 2.8% to $58.38. Anadarko Petroleum (APC - Get Report) gained 3% to $78.64. Cnooc (CEO) surged 5.7% to $184.63. Petrobras (PZE - Get Report) increased 6.4% to $13.43.

Halliburton (HAL - Get Report) fell 1% to $34.15 after BP (BP - Get Report) called upon the U.S. oil company to pay all costs related to the clean-up of the Gulf of Mexico oil spill in April 2010. BP climbed 3.2% to $44.12.

-- Written by Kaitlyn Kiernan in New York.



>To contact the writer of this article, click here: Kaitlyn Kiernan

To follow the writer on Twitter, go to @Kaitlyn_Kiernan.

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