Oil prices have risen above 109 US dollars (£68.6) a barrel and are approaching last year's highs as tensions increase over Iran's nuclear programme.
A weaker dollar is also a contributing factor.
Western nations fear Iran is building a weapon and have been trying to force it to open its facilities to inspection.
Iran has refused, turning away international inspectors this week for the second time this month.
As tensions rise, investors are snapping up oil contracts in anticipation of a protracted stand-off with one of the world's top oil exporters.
Benchmark West Texas Intermediate (WTI) crude surged 1.94 US dollars to settle at 109.77 dollars a barrel on the New York Mercantile Exchange, after climbing as high as 109.98 dollars earlier in the session.
WTI peaked near 114 dollars a barrel last May.