Iran announced over the weekend that it would stop selling oil to Britain and France in retaliation for a planned European oil embargo this summer. The move was mainly symbolic - Britain and France import almost no oil from Iran - but it raised concerns that Iran could take the same hard line with other European nations that use more Iranian crude.
The EU buys about 18% of Iran's oil exports, though most of that comes from sales to just two countries, Italy and Spain.
US crude rose by $1.60 to $105.20 a barrel in New York - the highest level since May 11. Brent crude rose by 55 cents to $120.60 in London.
The announcement by Iran follows a several-month stand-off with the US and Europe over Iran's nuclear programme.
Oil prices also were supported by Europe's approval of a second bail-out for Greece. The decision, which includes an agreement by Greece to cut spending, raised hopes that Europe will contain a banking crisis that has hurt its economy and weakened energy demand.
