Oil hit a one-month high above $50 a barrel on Tuesday as Israel's incursion into Gaza and a deepening dispute between Russia and Ukraine over natural gas prices sharply disrupted supplies to most of Europe.
Copper jumped more than 7 percent leading other industrial metals higher on buying before an annual re-rating by commodity indices. But gold slipped as the dollar firmed against the euro.
U.S. soybeans firmed on poor weather in major south American producing countries and sugar rose in sympathy with higher oil.
"Oil prices continue to be supported by political issues, whether they be gas or Gaza related," Rob Laughlin, broker at MF Global, said.
Middle East tension, supply cuts by OPEC oil exporters and the row between Russia and Ukraine have helped to boost crude prices by more than 50 percent from a low of $32.40 on Dec. 19. U.S. crude for February delivery was up $1.20 at $50.01 by 1142 GMT and earlier hit $50.10, the highest since Dec. 2. London Brent was up $1.76 at $51.38.
Russian gas supplies via Ukraine to the Balkans, Turkey and south-eastern Europe were halted on Tuesday and flows to EU-member state Austria dropped by 90 percent.
Russia and Ukraine blamed each other for the crisis which has struck at a time of unusually low winter temperatures across Europe, which receives about one quarter of its gas from Moscow.
The dispute threatens to worsen ties with the West already fraught after Russia's war with Georgia last year.
Europe receives about one fifth of its gas from Russia via Ukraine, leaving European customers vulnerable when Moscow reduced volumes to Ukraine on New Year's Day after failing to reach agreement with Kiev over gas prices.
In industrial metals, the commodity index-linked rally in copper is expected to be short-lived as demand concerns remain.
The Dow Jones AIG annually recalculates the weightings for the individual commodities in its index and is set to raise the weighting for copper traded on the New York Mercantile Exchange's COMEX division. The rebalancing takes place from Jan. 9 to 15.
"The arbitrage effect means that COMEX rallying significantly will also drag up (LME) copper," Leon Westgate, an analyst at Standard Bank, said. He added the reweighting impact will likely be temporary and he expects prices to come under pressure by the middle of January.
Three-month copper on the London Metal Exchange rose as much as 7.2 percent to $3,420 a tonne, the highest level since Dec. 4. It traded at $3,385 a tonne at 1101 GMT.
Gold slipped more than 2 percent in Europe, extending the previous session's losses, as the dollar strengthened to a fresh three-week high against the euro, denting the metal's appeal as a currency hedge.
"The strong dollar is dampening precious metals prices," said Commerzbank analyst Eugen Weinberg.
Spot gold was quoted at $843.00/845.00 an ounce at 1053 GMT, down from $858.90 late in New York on Monday but off its earlier low of $838.55.
Analysts said the prospect of an ECB rate cut at the bank's next interest rate meeting on Jan. 15 is pressuring the single currency, and consequently gold. A firm dollar reduces gold's appeal as an alternative investment.
In grains, U.S. soybean futures extended gains, rising above $10 per bushel for the first time in three months on crop-threatening dry weather in South America and strong Chinese demand.
A fall in the euro euro helped push European wheat to two-month highs in morning Euronext trade.
In soft commodities, sugar futures rose on trade and investor buying in sympathy with oil on tensions in the Middle East, while cocoa edged lower on hedge selling and coffee firmed on light fund buying, dealers said. (Additional reporting by Alex Lawler, Julie Crust, Jan Harvey, Gus Trompiz, David Brough, Naveen Thukral; Editing by William Hardy)
