Oil prices have continued to climb as US threats to start a war in Iraq and a national strike in Venezuela have unsettled the markets.

In thin trade before the Christmas break, benchmark Brent crude oil closed at $29.60 at 1230 GMT after trading as high as $29.80, just shy of the $29.88 post-September 11 peak.

Chavez has restarted some Venezuelan exports

"Traders are already fretting about the possibility of a strike on Iraq and a Venezuelan dispute overlapping," , said Lawrence Eagles at GNI.

US crude oil prices rose to $32 a barrel for the first time in almost two years on Monday.

London's International Petroleum Exchange, the world's leading oil market, reopens for business on Friday for a shortened session.

Troubled world

Fears of war were heightened when an Iraqi plane shot down and unmanned US Predator spy plane in Iraq's southern no-fly zone.

On Monday, US Defence Secretary Donald Rumsfeld stoked up global tension by threatening North Korea with military action, suggesting a two-front war.

Oil prices were also driven by events in Venezuela where a strike by right-wing business groups and unions against leftist President Hugo Chavez' rule has entered its fourth week.

Mr Chavez said his administration had restarted oil output and exports but the state-owned oil company Petroleos de Venezuela (PDVSA) said production had fallen to less than 7% of November levels.

Talks between the two sides have been suspended until Thursday.

Venezuela, the world's fifth largest oil exporter, normally supplies more than 13% of US oil imports.