Oil prices jumped to a nine-month high above $105 a barrel on Monday after Iran said it halted crude exports to Britain and France in an escalation of a dispute over the Middle Eastern country's nuclear program.
By Monday afternoon, benchmark March crude was up $2.02 to $105.26 per barrel in electronic trading on the New York Mercantile Exchange, the highest since May. The contract rose 93 cents to settle at $103.24 per barrel in New York on Friday.
Iran's announcement will likely have minimal impact on supplies, analysts said, because only about 3 percent of France's oil consumption is from Iranian sources. Britain had not imported oil from the Islamic republic in six months.
"The price rise is more a reflection of concerns about the further escalation in tensions between Iran and the West," said commodity analyst Caroline Bain of the Economist Intelligence Unit. "Banning the tiny quantities of exports to the U.K. and France involves very little risk for Iran - indeed quite the opposite, it catches the headlines and leads to a higher global oil price, which is something Iran is very keen to encourage."
Iran's oil ministry said Sunday it stopped crude shipments to British and French companies in an apparent pre-emptive blow against the European Union after the bloc imposed sanctions on Iran's crucial fuel exports. They include a freeze of the country's central bank assets and an oil embargo set to begin in July.
Iran's Oil Minister Rostam Qassemi had warned earlier this month that Tehran could cut off oil exports to "hostile" European nations. The 27-nation EU accounts for about 18 percent of Iran's oil exports.
Tehran also is considering extending the embargo to other countries.
The head of Iran's state oil company Ahmad Qalehbani was quoted by the Mehr agency as saying that the country would stop selling crude to nations who take action against Tehran.
The EU sanctions, along with other punitive measures imposed by the U.S., are part of Western efforts to derail Iran's disputed nuclear program, which the West fears is aimed at developing atomic weapons. Iran denies the charges, and says its program is for peaceful purposes.