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NEW YORK (Reuters) - Brent crude rose 3 percent and pushed back above $100 a barrel on Tuesday as mounting tension over Iran's nuclear program sparked concerns about supply threats, while hopes for economic stimulus also supported oil prices along with equities.
Both Brent and U.S. crude rallied more than $4 intraday, with Brent eclipsing $100 for the first time since June 11.
Iran claimed it had successfully tested missiles capable of hitting Israel in response to threats of military action against the Islamic Republic over its nuclear ambitions.
"I think this is positioning for geopolitical risk in the Middle East," said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis.
"Given that oil prices are low, buying in here is cheap portfolio insurance in case an event occurs," he added.
Brent prices have recovered from an 18-month low of $88.49 on June 22, having retreated from the 2012 peak above $128 hit in early March.
Recent data pointing to slowing global growth has fuelled hopes that policymakers in China, Europe and the United States will provide more stimulus to shore up sputtering economies.
Brent crude rose $3.19 to $100.53 a barrel by 12:43 p.m. EDT (1643 GMT), having reached $101.58, the highest intraday price since front-month Brent reached $101.90 on June 11.
U.S. crude was up $3.50 at $87.25 a barrel, having swung from $83.33 to $88.04.
Traders and analysts also pointed to short covering ahead of the U.S. Independence Day holiday on Wednesday and said the strong rally had triggered buy stop orders.
U.S. gasoline and heating oil futures also rallied ahead of Wednesday's holiday.
Brent's total crude trading volume outpaced turnover for U.S. crude, though both trailed their 30-day averages ahead of midday in New York.
"The oil-price rally is motivated by growing expectation of monetary accommodation and also a return of Iran to the market's agenda," said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas in London.
In Norway, an oil and gas workers' strike was another factor supporting oil prices. The strike has slowed crude shipments from the world's eighth-largest oil exporter, although unions on Tuesday decided against escalating the action for now.
REFOCUS ON IRAN
Iran's missile test claims came after Iranian parliamentarians proposed a bill calling for Iran to stop tankers taking oil to supporters of U.S.-led sanctions and a European Union embargo from passing through the Strait of Hormuz.
Iran had previously threatened to shut the strait if the EU went through with its embargo threat. About 17 million barrels a day of oil - almost a fifth of global production - from the top Middle East producers sailed through the narrow strait in 2011.
The EU embargo on Iranian oil took full effect on Sunday after the latest talks between Tehran and major world powers did not move the parties closer to resolving the dispute over Iran's nuclear program.
U.S. equities extended a rally for a third day on Tuesday as oil's price surge lifted energy shares and from better-than-expected data on new orders for manufactured goods in May. <.
European shares received a lift from hopes for more policy action to boost slowing global growth as a relief-rally at the start of second-half 2012 continued. .EU
The Thomson Reuters-Jefferies CRB index .CRB, a benchmark comprised of 19 commodities, gained 2.6 percent.
Key industrial feedstock copper hit a seven-week high on the prospects for more monetary easing and an unexpected rise in the services sector of top metals and No. 2 oil consumer China. <MET/L>
Ahead of weekly reports on U.S. oil inventories, crude stocks were expected to have fallen last week, while refined products stocks edged up, a Reuters survey of analysts on Monday showed.
(Additional reporting by Gene Ramos in New York, Alex Lawler in London and Ramya Venugopal and Jessica Jaganathan in Singapore; Editing by David Gregorio and Phil Berlowitz)
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