Oil Price Surge on Jitters over Iran

World oil prices shot higher on Thursday as traders weighed rising tensions in the Middle East and a slight easing of worries over Europe.

New York's main contract, light sweet crude for December, gained $2.04 to $97.78, while Brent North Sea crude for delivery in December added $1.40 cents to $113.71 a barrel in London.

The prospect of sanctions against Iran hitting the country's energy sector provided one upward drive on prices.

"We are still responding to chatter about a potential conflict in the Middle East," said Bart Melek of TD Securities.

Lower tensions in Europe also helped push prices higher, on the expectation of stronger demand.

"Crude prices have gathered some modest upside momentum to recover some of yesterday's losses as equities pare losses and Italian debt yields come off their record highs," said Myrto Sokou, an analyst at Sucden brokers.

Oil prices on Wednesday fell as the market fretted over heightened economic turmoil in Europe and IMF chief Christine Lagarde warned of a potential "downward spiral" in the global economy.

Italian borrowing rates soared above 7.0 percent on Wednesday, touching levels considered too high for Italy to be able to fund its public deficit over the longer term.