NEW YORK ? Oil prices jumped about 2 percent Tuesday as tensions rose in Iran and strong retail sales put a rosier glow on the U.S. economy.
Benchmark crude rose $2.32, or 2.4 percent, to $100.09 per barrel in New York. Brent crude, which is used to price foreign oil imported by some U.S. refineries, rose $2.05 to $109.13 a barrel in London.
Oil prices shot up shortly after the stock market opened for business.
Analysts said traders were reacting to more saber-rattling by Iran following accusations that it is building nuclear weapons.
Iranian leaders said the country's navy plans to run drills to practice closing the Strait of Hormuz at the mouth of the Persian Gulf. About a third of the world's oil tanker traffic passes through the strategic waterway, and even a brief closure could crimp oil supplies around the world. Longer, more expensive routes would have to be used to transport crude from the region.
Rumors swirled about what the Federal Reserve might do at its Tuesday policy meeting to further stimulate the economy. The Organization of Petroleum Exporting Countries also will meet Wednesday in Europe to decide how much oil to bring to the market.
"There's just a lot of chatter out there," said Addison Armstrong, director of market research at Tradition Energy. "There are a lot of possibilities of what might happen," but traders are choosing to err on the side of buying rather than selling.
On Tuesday the government said that consumers' retail spending rose in November for the sixth straight month. The U.S. economy is driven by consumer spending, and more spending points to stronger demand for oil. A separate government report said that U.S. businesses built up their stockpiles in October. That is another encouraging sign for the economy, suggesting growing confidence among businesses that they can sell those goods.
Gas pump prices slipped by less than a penny Tuesday to a national average of $3.269 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is about 15 cents cheaper than a month ago and 29 cents cheaper than a year ago.
In other energy trading, heating oil rose 3.04 cents to $2.9265 per gallon, and gasoline futures increased by 5.52 cents to $2.6188 per gallon. Natural gas rose by 3.5 cents to $3.288 per 1,000 cubic feet.
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Chris Kahn can be reached at http://twitter.com/ChrisKahnAP
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