Oil market firms on simmering Iran tensions

World oil prices firmed on Friday at the end of a volatile week, as tensions over key producer Iran offset the impact of the strong dollar and rising US inventories, analysts said. In London morning trade, Brent North Sea oil for delivery in February rose 34 cents to $113.08 per barrel. New York's main contract, West Texas Intermediate (WTI) for delivery in February, advanced 41 cents to $102.22 per barrel. Oil futures had slid on Thursday as the euro tumbled against the dollar and US stockpiles unexpectedly rose, raising concerns about weak demand in the world's biggest oil-consuming nation. The US Department of Energy said Thursday that US reserves jumped 2.2 million barrels in the week ending December 30. However, crude oil prices remain supported by tensions in the Middle East between Western powers and major oil producer Iran over Tehran's alleged efforts to build a nuclear bomb. "The Iran crisis should prevent any further decline in prices," said Commerzbank analyst Carsten Fritsch. Earlier this week, oil had spiked close to eight-month highs on the back of heightened tensions between the West and Iran. Tehran will hold fresh military exercises in and around the strategic Strait of Hormuz within weeks, the naval commander of its powerful Revolutionary Guards was quoted as saying on Friday. The manoeuvres are to be held in the Iranian calendar month that runs from January 21 to February 19, the Fars news agency quoted Ali Fadavi as saying. They are to underline Iran's assertion that it has "full control over the Strait of Hormuz area and controls all movements in it," Fadavi added. The announcement -- which narrowed down a timeframe for the exercises the Guards had previously only given as "soon" -- risked aggravating tensions with the West over the strait. The waterway is the world's "most important chokepoint" for oil tankers, according to the US Energy Information Administrations. Some 20 percent of the world's oil flows through the narrow channel at the entrance to the Gulf. Iran's regular navy completed 10 days of wargames to the east of the strait, in the Gulf of Oman, earlier this week with tests of three anti-ship missiles. The European Union is moving closer to imposing an Iran oil embargo and Tehran has warned the United States to remove its naval forces from the Gulf, threatening to disrupt shipping through the strategic Strait of Hormuz. "Fresh fears of a military confrontation that would endanger the flow of crude through the Strait of Hormuz have rattled oil markets since the start of the year," Barclays Capital said in a market commentary. "As Iran ratchets up its anti-Western rhetoric and military exercises, the West continues to tighten its stringent sanctions against the country." Oil market gains remain limited due to the stronger greenback, which makes dollar-priced oil more expensive for buyers using weaker currencies, helping to dampen prices. In earlier Asian trade on Friday, the European single currency slumped to $1.2764, its lowest level since September 13, 2010, on stubborn concerns over the region's festering sovereign debt crisis. At the same time, traders are also worried about the long-term impact of the euro crisis on energy demand. Sizzling geopolitical tensions over Iran had sent oil prices hurtling higher earlier this week. On Wednesday, New York's light sweet crude had surged as high as $103.74 per barrel, a level previously reached on May 11. London Brent oil meanwhile leapt on Thursday to $114.64, its highest point since November 14.