oil Reuters

Crude oil futures advanced Tuesday on fears that growing tensions between Iran and the West may threaten crude supplies from the Middle East.

Light sweet crude for August delivery gained 52 cents to $84.27 a barrel in electronic trading on the New York Mercantile Exchange during European trading hours. Brent crude oil futures for August delivery rose 0.60 percent to $97.92 a barrel on the ICE futures exchange in London.

Two days after an EU oil embargo took effect, Iran's National Security and Foreign Policy Committee drafted a bill to try and stop crude oil tankers from passing through the Strait of Hormuz, one of the most important oil transit channels in the world, to countries that support sanctions against it. But such a bill would still require support from the leadership to come into effect, Reuters reported.

The economic sanctions on Iran by the EU came into full effect Sunday. However, analysts expect that the tightening of Western sanctions on Iran will not have a large impact on global oil prices as demand is softening and other suppliers are both able and willing to meet any shortfall. However, if Iran closes the Strait of Hormuz, it will seriously affect the global oil market adversely.

On Monday, light sweet crude for August delivery fell $1.21 and settled at $83.75 a barrel on the New York Mercantile Exchange while Brent crude oil declined 46 cents to settle at $97.34 a barrel as weak manufacturing reports from the U.S., China and Europe raised concerns of a further global slowdown.

The Institute for Supply Management (ISM) said Monday that U.S. factory activity contracted for the first time in three years as demand fell amid the euro zone crisis. News from China was also not encouraging as official data showed that manufacturing activity in the world's second largest economy slowed further in June. Meanwhile, euro zone's unemployment rose to a new record high in May and manufacturing activities fell for the 11th consecutive month in June.