NEW YORK, USA – Oil prices jumped about two per cent yesterday as tensions rose in Iran and strong retail sales put a rosier glow on the US economy.

Benchmark crude rose US$2.37 ($204.41), or 2.4 per cent, to end the day at US$100.14 per barrel in New York. Brent crude, which is used to price foreign oil imported by some US refineries, rose US$2 to finish at US$109.08 a barrel in London.

Analysts said traders reacted to more saber-rattling by Iran, as the country continues to deny accusations that it is developing nuclear weapons. Iran’s navy now plans to run drills, practicing a closing of the narrow Strait of Hormuz at the mouth of the Persian Gulf.

About a third of the world’s oil tanker traffic passes through that strategic waterway, and even a brief closure could crimp oil supplies around the world. Longer, more expensive routes would have to be used to transport crude from the region.

“There’s just a lot of chatter out there,” said Addison Armstrong, director of market research at Tradition Energy. “There are a lot of possibilities of what might happen,” but traders are choosing to err on the side of buying rather than selling.

Rumors swirled during the day about what the Federal Reserve might do to further stimulate the economy. The Fed, which met Tuesday, left open the possibility for new steps to stimulate the economy next year if needed, but said the nation’s economy appeared to be slowly recovering..

The Organization of Petroleum Exporting Countries will meet Wednesday in Europe to decide how much oil to bring to the market. OPEC trimmed its forecast for global oil demand in 2012. But at 88.9 million barrels per day, OPEC’s outlook still puts world demand at a record high next year.

Yesterday the government said that US consumers’ retail spending rose in November for the sixth straight month. The US economy is driven by consumer spending, and more spending points to stronger demand for oil. A separate government report said that US businesses built up their stockpiles in October. That’s another encouraging sign for the economy, suggesting growing business confidence.

Still, a private survey showed that Americans continue to cut back on gasoline purchases. MasterCard SpendingPulse reported yesterday that the four-week average for US retail gasoline demand fell by 4.2 per cent year-over-year. That’s the 38th week in a row that gasoline demand fell.

In other energy trading, heating oil rose 3.27 cents to finish at US$2.9288 per gallon, and gasoline futures increased by 6.18 cents to end at US$2.6254 per gallon. Natural gas rose 2.5 cents to finish the day at US$3.279 per 1,000 cubic feet.