Oil rose above $100 US a barrel Tuesday, as Iran announced it would hold military manoeuvres at a transportation choke point in the Persian Gulf.
January crude closed at $100.14 US a barrel, up $2.37.
Prices have risen almost 10 per cent this year.
Iranian leaders said the country's navy plans to run drills to practice closing the Strait of Hormuz at the mouth of the Persian Gulf.
About a third of the world's oil tanker traffic passes through the strategic waterway, and even a brief closure could crimp oil supplies around the world.
Longer, more expensive routes would have to be used to transport crude from the Mideast.
"There's just a lot of chatter out there," said Addison Armstrong, director of market research at Tradition Energy.
"There are a lot of possibilities of what might happen," but traders are choosing to err on the side of buying rather than selling.
Oil is Canada’s biggest commodity export.