Oil also received a boost from separate reports showing jobless claims fell last week in the US, while consumer sentiment rose more than expected in December, offsetting news that third-quarter economic growth was pegged lower than the previous estimate.
Dominick Chirichella, analyst at New York's Energy Management Institute, said financial markets were entering a period of low liquidity and could expect relatively large intraday moves over the end-year festive season.
"Iran and the broader Middle East, including Iraq now that the US is gone, will continue to act on the oil market with exposure for price spikes at anytime. The geopolitics of the region are once again on the radar," he said.
Brent February crude rose 46 cents to $108.17 a barrel by 11:17 a.m. EST (1617 GMT), having reached $108.50.
Possible resistance at Brent's 100-day moving average of $109.30 loomed above.
US February crude rose 90 cents to $99.57 a barrel, having reached $99.87.
Both Brent and US crude trading volumes were less than 175,000 lots traded, with Brent 65 percent below the 30-day average and US volume 75 percent below its 30-day average.
A rash of bombings hit Baghdad, killing at least 63 people, in the first big attack on Iraq's capital since a crisis between its government and rivals erupted after the withdrawal of US troops.
The bombings followed a move by Prime Minister Nuri Al-Maliki to sideline two key Sunni Muslim leaders in the country, which pumped 2.67 million barrels per day in November, according to a Reuters survey.
Adding to the geopolitical fear premium for oil, Iranian state television quoted a navy commander as saying the Islamic Republic's navy will conduct a 10-day war game in an area from east of the Strait of Hormuz to the Gulf of Eden starting on Saturday.
Worries about supplies from producers such as Iraq and Kazakhstan and the possibility that sanctions could curb Iranian oil sales have been supporting prices.
In Kazakhstan, KazMunaiGas Exploration Production said it expected to meet a reduced oil output target for the year after police deployed armed security around the oilfield closest to the scene of this week's riots. Adding support for oil prices was a report showing new US claims for unemployment benefits fell last week to their lowest in more than 3-1/2 years, dropping 4,000 to a seasonally adjusted 364,000.
US consumer sentiment improved in December to its highest level in six months, adding lift to oil prices and equities on Wall Street. The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment rose to 69.9 from 64.1 in November.
Crude prices pared gains and briefly seesawed near flat after data showed US gross domestic product grew at a 1.8 percent annual rate in the third quarter, down from the previously estimated 2 percent.
