Renewed tensions between Iran and the West pushed oil to its highest level in more than a month.
Iran is again threatening to block a critical Persian Gulf shipping route in response to a European embargo of Iranian oil. Iran has sparred for months with the West over its nuclear programme.
Benchmark US crude added US$3.91, or 4.7 per cent, to end at US$87.66 per barrel in New York. That's the highest price since May 30.
Brent crude, which sets the price of oil imported into the United States, rose above US$100 for the first time in three weeks, adding US$3.34, or 3.4 per cent, to finish at US$100.68 per barrel in London.
Iran said Tuesday that it test-fired several ballistic missiles, including a long-range variety meant to dissuade an attack by Israel or the US.
The New York Times reported that the US has sent military reinforcements into the Persian Gulf to deter the Iranian military from any possible attempt to block the vital waterway known as Strait of Hormuz.
Iran's earlier sabre-rattling helped boost US oil above US$110 per barrel and Brent above US$125 in early March.