Oil prices rose in Asia Monday after crude kingpin Saudi Arabia cut diplomatic ties with Iran following a row over Tehran`s execution of a Shiite cleric.
Saudi Arabia announced the decision Sunday, a day after protesters ransacked its embassy in Tehran over the execution of a Shiite cleric.
Saudi Foreign Minister Adel al-Jubeir said Iranian diplomats had 48 hours to leave the kingdom and Iran`s supreme leader said Saudi Arabia would face "quick consequences" for executing the cleric.
Fearing further upheaval in the already volatile Middle East, the United States has urged regional leaders to take measures to soothe tensions.
At around 0230 GMT, US benchmark West Texas Intermediate for delivery in February was up 48 cents, or 1.30 percent, at $37.52 and Brent crude for February was trading 61 cents, or 1.64 percent, higher at $37.89.
"Oil started the new year on the mend, as Asian markets reacted to fears that geopolitical tensions in the Middle East may threaten the supply of oil," said Bernard Aw, market strategist at IG Markets in Singapore.
Despite the rise, Aw said however that the persistent global crude oversupply will continue to weigh down on prices over the longer term.
"Unless we see a convincing drop in oil output from these two nations, and the broader oil producing community, the supply glut issue will persist, which means oil prices would remain under pressure for a longer period," he told AFP.
Saudi Arabia is the biggest producer in the Organization of the Petroleum Exporting Countries, which last month decided against cutting output levels despite a plunge in oil prices. Iran is also a key OPEC member.