Oil topped $ 100 a barrel for the first time in three weeks on Tuesday as tension over Iran increased concerns about threats to supply and as investors bet on further policy action to support global economic growth.

Oil rebounded in New York on signs that central banks from Europe to China may ease monetary policy to spur economic growth and speculation sanctions against Iran will hurt oil market.

Futures gained as much as 1.1 percent, reversing earlier losses. The European Central Bank is forecast to cut interest rates this week to help curb the debt crisis, while a state- owned newspaper in China said the time is right to increase liquidity in the banking sector. An embargo targeting Iranian oil exports will probably have a bigger affect on global economy than previously estimated, according to Goldman Sachs Group Inc.

“It’s getting to a point, I think, that the bad numbers become a good thing for the market because we believe that there will be some action for stimulus,” Carl Larry, the president of Oil Outlooks & Opinions LLC in New York, said in a Bloomberg Television interview. He forecast that New York crude will average $ 92 to $ 94 a barrel this year.

Oil for August delivery climbed as much as 88 cents to $ 84.63 a barrel and was at $ 84.45 in electronic trading on the New York Mercantile Exchange at 4:14 p.m. in Sydney. The contract slid $ 1.21 to $ 83.75, the lowest close since June 28. Prices are 15 percent lower this year.

Brent oil for August settlement was at $ 98.21 a barrel, up 87 cents, on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was at $ 13.77, up from $ 13.59 .
Iran Sanctions

A European Union embargo on Iran entered into full force on July 1 after exemptions on some contracts and insurance ended.
Iran’s parliament is working on a bill to close the Strait of Hormuz to oil tankers linked to countries applying new European Union sanctions, a lawmaker from the national security committee told Jam-e-Jam newspaper. The waterway is a transit route for a fifth of the world’s crude.

According to the draft bill, Iran would block vessels carrying crude to countries that have initiated EU sanctions, Javad Karimi-Ghodousi said in an interview with the Tehran-based newspaper.

“Growing political tension and potential supply disruptions will be supportive for oil prices, particularly Brent, despite macroeconomic concerns,” Mark Pervan, the head of commodity research at Australia & New Zealand Banking Group Ltd. (ANZ) in Melbourne, said in a note .
Rate Cut

European bank officials will lower the main interest rate by a quarter percentage point to a record 0.75 percent on July 5, a Bloomberg News survey of economists shows. EU leaders, who announced plans last week to stem the region’s debt crisis by amending bailout rules and moving toward a banking union, are now looking to the central bank to help.

U.S. crude stockpiles probably dropped by 1.9 million barrels last week, according to the median estimate of eight analysts in a Bloomberg News survey before an Energy Department report . The industry-funded American Petroleum Institute will report its own data .

Gasoline supplies increased 1 million barrels last week, according to the survey. Refineries traditionally step up operations with the start of the so-called driving season, which runs from Memorial Day at the end of May to Labor Day in early September.

U.S. regular gasoline prices averaged $ 3.356 a gallon at the pump in the week ended , down 8.1 cents a gallon from the previous week, according to the EIA. The fuel is 22.3 cents a gallon cheaper than at this time last year.