The price of oil climbed to above $98 a barrel Monday amid concerns over an escalation in the civil war in Syria and as traders awaited a critical meeting of the U.S. Federal Reserve later in the week.
By early afternoon in Europe, benchmark oil for July delivery was up 43 cents to $98.28 a barrel in electronic trading on the New York Mercantile Exchange.
Over the past few days, traders have grown increasingly worried over the intensifying civil war in Syria. At least 93,000 people have been killed in the Syrian conflict since it erupted in March 2011, according to a recent U.N. estimate. President Bashar Assad's forces are pressing ahead with an offensive to regain territory they lost to the rebels trying to topple his regime.
"The oil price is currently being driven primarily by geopolitical aspects," said analysts at Commerzbank in Frankfurt. "The decision of the U.S. to supply arms to the rebels in Syria threatens finally to turn the civil war in Syria into a proxy war between the world powers, given that Russia is providing military support to the Assad regime."
Containing some of the upside in the price of oil was the election of Hasan Rowhani as president of Iran. Considered a moderate, Rowhani's election is being viewed as lowering the potential of further conflict in the Middle East, which supplies around a third of the world's crude.
"At the very least, the election result makes it less likely that Israel will launch a military strike against Iran's nuclear facilities," Commerzbank added.
Speculation about the upcoming policy decisions of the U.S. Federal Reserve also kept markets on edge.
The Fed has been supporting the U.S. economy by buying $85 billion in bonds every month as part of a plan to keep interest rates low and encourage borrowing, spending and investing. Recent signs of a recovery, however, have raised questions about whether the Fed might start to pull back.
Some investors worry that long-term interest rates could spike when the Fed tightens monetary policy, threatening the economic recovery. The Fed will start a two-day meeting Tuesday to discuss the central bank's next steps.
"Ultimately markets are likely to successfully transition to a world of reduced Fed asset purchases but this may take a while. In the meantime market stress is set to remain elevated," said analysts at Credit Agricole CIB in a market commentary.
Brent crude, a benchmark for many international oil varieties, was up 26 cents to $106.19 a barrel on the ICE Futures exchange in London.
In other energy futures trading on the Nymex:
— Wholesale gasoline was down 0.09 cent to $2.8958 a gallon.
— Heating oil added 0.09 cent to $2.9631 per gallon.
— Natural gas advanced 7.4 cents to $3.807 per 1,000 cubic feet.
Pamela Sampson in Bangkok contributed to this report.