In Monday trading "oil futures were higher as tensions between Iran and the West remained high after news reports at the weekend suggested the US is looking at its military options", analysts at the Sucden brokerage said.
New York's main contract, light sweet crude for delivery in May, added 65 cents to 68.04 dollars per barrel in electronic deals before the market's official opening.
In London, the price of Brent North Sea crude for May delivery rose by 62 cents to 67.95 dollars per barrel in electronic trade
Iran branded as "psychological warfare" Sunday's media reports that the US military was planning air strikes to force Tehran to abandon its controversial nuclear programme.
Two US publications, The Washington Post and the New Yorker magazine, had reported that the White House was studying options for military strikes against Iran's nuclear facilities.
The administration of US President George W. Bush, which accuses Tehran of seeking to manufacture a nuclear bomb, has repeatedly said it is keeping all options open even though it supports efforts for a diplomatic solution.
Iran is the world's fourth-biggest producer and has an output of some 4.0 million barrels per day. Traders fear that action against the Islamic republic could severely disrupt the oil-rich nation's crude exports.
The market is also anxious over persistent geo-political problems in both Iraq -- embroiled in insurgency -- and Nigeria.
Prices had eased Friday on profit-taking triggered by expectations that Nigeria, Africa's biggest exporter of crude, may soon recover production lost to attacks by militants.
"The situations in Nigeria, Iran and Iraq remain uncertain," Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo, said Monday.
"Fears of supply disruptions from these oil-producing nations remain."
Anglo-Dutch energy giant Royal Dutch Shell had announced on Friday that it would conduct an inspection of its energy facilities in the southern Niger Delta as soon as possible, with a view to partially restarting production.
Emori added that tight gasoline supplies in the United States -- the world's biggest energy guzzler -- ahead of the summer driving season that starts in late May, is adding pressure on prices to trend higher.