--Oil prices up ahead of Merkel, Sarkozy meeting on euro zone debt crisis --Market cautiously optimistic EU leaders will get a handle on the region's debt crisis at key summit Friday --Prices are strong, with analysts seeing potential for Nymex to climb to $105/bbl --Iran tensions continue to support prices amid threats of further sanctions By Sarah Kent and Iman Dawoud Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Crude prices were higher Monday ahead of a meeting between German Chancellor Angela Merkel and French President Nicholas Sarkozy later in the day. Investors are hoping for positive indications that the two leaders are making steps towards resolving the region's sovereign debt crisis before a key European Union summit on Friday. At 1047 GMT, the front-month January Brent contract on London's ICE futures exchange was 93 cents, or 0.9%, higher at $110.87 a barrel. The front-month January contract on the New York Mercantile Exchange was trading up 77 cents, or 0.8%, at $101.73 per barrel. Investors started the week cautiously optimistic that European Union leaders may finally be getting a handle of the region's debt crisis after Italy announced a EUR30 billion austerity plan over the weekend. The euro and equity markets were higher as a result, helping to support gains in the oil price. Crude prices tend to rise with the euro, as a weaker greenback makes the dollar-denominated commodity cheaper for holders of other currencies. Although Monday's gains were modest, a strong rally last week helped Nymex crude remain above the psychologically important $100 a barrel mark, with many analysts predicting another move higher. "If WTI crude oil holds support at the $100 level we can see further gains towards $105," said Myrtou Sokou, research analyst at Sucden Financial. "Right now the oil market is quite strong based on all the uncertainty. The more domestic news [we] get from the eurozone, the more potential for a stronger upside in the oil market," she added. Meanwhile, ongoing geopolitical tensions lent support to the oil price as the international community continued to call for greater sanctions against Iran. "I feel there is a genuine fear that events in Iran could escalate and traders do not want to be caught short," said Glen Ward, head of retail derivatives at London Capital Group. "They are buying back now especially as we could possibly see a stronger euro with a positive outcome from the current discussions," he added. At 1047 GMT, the ICE's gasoil contract for January delivery was up $11.75, or 1.2%, at $954.75 per metric ton, while Nymex gasoline for January delivery was 212 points, or 0.8%, higher at $2.6374 per gallon. -By Sarah Kent and Iman Dawoud, Dow Jones Newswires; 4420-7842-9376; sarah.kent@dowjones.com

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