Oil leapt more than $1 yesterday after Iran vowed to pursue its uranium enrichment programme.
The decision by Iran's supreme leader, Ayatollah Ali Khamenei, head of the world's fourth largest oil exporter, could lead to possible sanctions, thereby affecting exports and forcing oil prices even higher.
Iran exports more than two million barrels per day.
US crude settled at $72.45 a barrel, while London Brent crude rose $1.08 to $73.38.
The UN security council has set a deadline of August 31st for Iran to halt its nuclear programme, while Tehran insists its nuclear aims are entirely peaceful.
Oil prices were also affected by the ongoing sabotage of oil pipelines in the Niger Delta, Nigeria, and lingering questions over whether the fragile truce between Israel and Hizbollah will last.
The Middle East supplies almost a third of the world's oil, with Iran due to respond to the UN security council this week.