NEW YORK - Oil rose on Tuesday as Iran's threats to cut off the key oil shipping route through the Strait of Hormuz added to concerns about potential threats to supplies from the region.
Facing the possibility of more European Union sanctions by the end of January over its nuclear program, Iran's first vice president warned that the flow of oil through the Gulf strait -- which moves crude from Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq -- would be stopped if foreign sanctions are imposed on Iran's oil exports.
Iran's warning added to concerns about potential threats to the region's oil exports, with recent violence in Iraq and unrest in Syria possibly threatening shipments there.
Consumer confidence rose to an eight-month peak in December, according to the U.S. Conference Board, accentuating oil's price rally along with thin trading volume in the year-end holiday week, analysts and brokers said.
"The geopolitical fear premium with the Iran comments and also the U.S. consumer sentiment rising to an eight-month high make it hard to be short on oil during this holiday week," said Phil Flynn, analyst at PFGBest Research in Chicago.
Brent February crude rose $1.31 to $109.27 a barrel Tuesday, having reached $109.50 and breaching front-month Brent's 100-day moving average of $109.34.
U.S. February crude rose $1.66 to $101.34 a barrel, having hit as high as $101.39 earlier in the day.
Crude trading volumes remained reduced in the holiday week as the year's end approaches.
IRAN AND POTENTIAL SUPPLY THREATS
It was not the first time Iranian leaders have raised the specter of shutting the strait in the standoff over Tehran's nuclear program, and EU leaders have not made explicit calls for an embargo on Iranian crude.
France, backed by Germany and Britain, has led the push to ban Iranian crude, but other states, notably Greece, have expressed reservations because of their reliance on Iranian oil.
Shutting the Strait of Hormuz could cut supplies of a third of all seaborne oil. Ahead of Iran's latest threat industry sources said top exporter Saudi Arabia and other Gulf OPEC states are ready to replace Iranian oil if sanctions halted Iranian supply to Europe.
Iran began 10 days of naval exercises in the Strait of Hormuz on Saturday, already raising concern about a possible closure.
A series of bombings have hit Iraq in an escalating dispute between the Shiite-led government and Sunni leaders and Syria said on Saturday its oil production had fallen by a third due to international sanctions imposed over its crackdown on protests.
Concerns that Europe's debt crisis might spread and have a broad, dampening, effect on oil demand helped limit the oil price rise.
U.S. stocks fluctuated between small gains and losses, ending up slightly in a light-volume session, suggesting a 5 percent rally over the previous four sessions may have largely run its course. The S&P 500 turned positive for the year on Friday on improving economic data.
© 2016 Thomson/Reuters. All rights reserved.