Oil prices surged 4% Tuesday January 3, 2012, fueled by continued anxiety over Iran's growing threat to shut down the Strait of Hormuz after the Iranian military launched a missile test.

"It's mostly about Iran right now," said Peter Beutel, analyst with energy risk management firm Cameron Hanover. "That's the most bullish factor."

Oil prices jumped 4.2% to settle at $102.96 a barrel. That's the highest closing price since May 10, when prices ended the day at $103.88 a barrel.

The Strait of Hormuz is a critical shipping lane, with 17 million barrels of oil per day passing through in 2011, according to the U.S. Energy Information Agency.

That's about one sixth of global oil production and nearly 20% of all the oil traded worldwide. Iran itself only exports about 2.2 million barrels of oil a day.

Just last week, Iran issued its initial threat to shut the shipping lane linking the Persian Gulf with the Gulf of Oman. Iran's southern coast borders that entire area.

"If Iran oil is banned, not a single drop of oil will pass through Hormuz Strait," Iran's 1st Vice President Mohammad Reza Rahimi said at that time, according to the Iran State News Agency.

The new Iranian threat followed increased sanctions from Western countries to limit the amount of oil that Iran can export. In particular, the U.S. government tightened restrictions on companies that provide Iran with equipment and expertise necessary to run its oil and chemical industries.