Oil prices soared Tuesday as tensions grew over key Persian Gulf oil

In midday trading, benchmark crude jumped US$3.55, or 3.6 per cent, to US$102.38 per barrel in New York.

Brent crude, which is used to price foreign oil varieties that are imported by US refineries, rose US$3.26, or three per cent, to US$110.64 per barrel in London.

Prices shot up as exchanges opened for the first day of 2012 trading. Commodity prices tend to rise at the beginning of January as investors start the new year with a fresh round of trading. This year prices were driven by heightened concerns that Iran might try to close the Strait of Hormuz in the Persian Gulf to oil tankers, if Western nations impose new sanctions.

Iran warned the US to stay out of the strategic waterway, where one-sixth of the world’s oil shipments pass every day. On Monday its navy fired a cruise missile as part of a military exercise.

The US and European nations are mulling further economic sanctions against Iran because of its nuclear programme.

A stand-off could be damaging to the global economy.

A dustup with Iran could slow crucial oil supplies at a time when the world needs every drop.

Global oil demand is expected to rise to a record 89.5 million barrels per day in 2012. Demand was an estimated 89 million bpd in 2011.

Three of the world’s largest economies – the US, China and India – continued to grow with increased manufacturing activity in December.

A private trade group said US manufacturing expanded last month at the fastest pace in six months. The US Commerce Department also said US construction spending jumped in November on a spate of new projects for single-family homes and apartments.

In other energy trading at midday Tuesday, heating oil rose 10 cents, or 3.5 per cent, to US$3.02 per gallon, while gasolene futures rose by seven cents, or 2.8 per cent, to US$2.7310 per gallon and natural gas fell by about a penny to US$2.98 per 1,000 cubic feet at midday.

– AP