New York: Fears of violence in the Persian Gulf escalated, pushing the price of oil higher. The Obama administration slapped Iran with more sanctions aimed at stifling its nuclear program. Traders, who worry that the sanctions will eventually lead to a military conflict in the Gulf, responded by buying oil.
"This just puts the risk back out there," said Phil Flynn, an oil analyst with Price Futures Group.
Oil prices, which had been down all day, jumped after the sanctions were announced on Thursday. Benchmark US crude added 27 cents to end at $86.08 per barrel in New York. Brent crude, which sets the price for imported oil, added 84 cents to finish at $101.07 per barrel in London.
The US and other Western nations believe Iran is building a weapon and have heaped financial and diplomatic pressure on the country since November to force it to negotiate. Iran denies the claim. Its leaders have threatened to block a key shipping channel out of the Gulf if the sanctions continue.
Such a move, or a conflict in the area, could slow down or even halt shipments out of one of the world's most prolific sources of oil. About 20 per cent of the oil traded around the world comes from the Persian Gulf. Sanctions helped cut Iran's oil production by 188,500 barrels per day from May to June as buyers looked for other sources of crude, according to OPEC.
Iran fell to No. 3 in OPEC production last month. Iraq moved to No. 2, behind Saudi Arabia.
Thursday's sanctions were aimed at companies and people affiliated with Iran's defense ministry. Previous sanctions were meant to curtail its ability to export oil. Earlier this year, European refineries stopped buying Iranian oil, and Iran's banks were blocked from doing business with much of the world.
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