London: Oil prices spiked close to eight-month highs on Thursday as traders fretted over heightened tensions between key crude producer Iran and the United States over transit through the Gulf.

The market also found solid support in a stream of positive economic data which boosted the outlook for the global economy and energy demand.

New York's main contract, West Texas Intermediate (WTI) for delivery in February, spiked to USD 103.74, a leval last touched on May 11. The contract fell back to USD 102.61, down 35 cents from yesterday's closing level.

Brent North Sea crude for February jumped to USD 113.97 per barrel -- which was its highest level since November 14. It later stood at USD 112.82, 69 cents higher than Wednesday.

"Alongside the return of economic optimism, oil is also finding support from the continuing tensions between Iran and the United States as sabre-rattling is stepped up on both sides," said Commerzbank analyst Eugen Weinberg.

"Last weekend, the US again tightened its sanctions against Iran, essentially banning transactions with the Iranian central bank, via which oil business with Iran mainly takes place.

"On Wednesday, Iran threatened counteraction should the US send an aircraft carrier back to the Persian Gulf. In light of these developments the oil price is likely in the short term to continue to rise."

Oil rocketed on Wednesday, underpinned by positive US, Chinese and eurozone economic data, and deepening worries over Iran. The WTI contract leapt by USD 4.13 and Brent USD 4.75.

"The situation with Iran remains worrisome," said Nick Trevethan, senior commodities strategist at ANZ Research.

"The consequences of any military action in the Middle East will be enormous. A spike in crude prices will kill off any recovery in the US," he added.

(Agencies)