Oil prices rose nearly 2% above $67 a barrel this evening as US equities jumped and news emerged that Iran was test-firing missiles.
US stocks climbed as more merger and acquisition activity encouraged investors and hinted at economic recovery, which could spur energy demand.
US crude rose $1.18 to $67.20 a barrel, after earlier falling as low as $65.41. London Brent rose 86 cents to $65.97.
Support for oil prices also came from Iran test-firing a type of missile today that defence analysts said could hit Israel and US bases in the Gulf region.
Tensions over Tehran's nuclear programme have supported oil prices in recent years. The country is the second-largest oil producer in the Middle East.
Late last year, Iran threatened to block the Strait of Hormuz, through which about 40% of the world's globally traded oil passes, when tensions rose in another row with the US around the nuclear work.
Even so, sluggish oil demand, reinforced by some lacklustre economic data from the US last week, continued to command investors' attention.
Oil prices posted their largest weekly decline in two to three months last week, pressured by government data showing US crude oil inventories had risen, suggesting demand remains weak.
US durable goods orders dropped by the largest amount in seven months while a rise in new home sales was less than forecast.
