Business  » Market watch

World oil prices clung at nine-month highs Wednesday, boosted by fears that tensions over key crude producer Iran's nuclear program could curb supplies.

New York's main contract, light sweet crude for delivery in April, finished its first day of trade down a mere three cents at $106.28 a barrel.

In London, Brent North Sea oil for April leaped $1.24 from Tuesday to settle at $122.90 a barrel.

The price of the benchmark New York contract has jumped nearly 10 per cent since the start of February and investors appeared happy to push it higher.

"It is a crazy market," said Phil Flynn at PFG Best Research.

After crude oil prices spiked sharply higher Tuesday on news the European Union and Greece finally agreed a second bailout deal, developments in Iran bolstered the markets.

"We did have a reaction to a break of the nuclear talks with Iran," Flynn said, referring to Iran's refusal to allow UN inspectors access to a key military site.

The visit by the team from the International Atomic Energy Agency was aimed at clarifying issues surrounding possible military aspects of Iran's nuclear program.

Flynn said the market was responding to growing tensions over the West's assertions that Iran is developing nuclear weapons. Iran insists its nuclear program is for civilian uses.

"How do we get out of this conflict with Iran?" he said. "Right now the market is saying there is no way out!"

Capital Economics analyst Julian Jessop warned on Wednesday that the oil market could spike beyond $200 per barrel if the situation escalates.

"Oil prices could surge if Iran tensions escalate and this would be a game-changer," Jessop said.

"Brent might spike as high as $210 in a worst-case scenario involving the closure of the Strait of Hormuz.

"But our view remains that any such escalation would be a military, economic and political disaster for Iran, as well as something that the West would want to avoid too."