Oil near $138 as Iran denies rumoured attack

LONDON (Reuters) - Oil rose for a third straight session on Tuesday to more than $138 a barrel, boosted by a rumoured attack on Iran's nuclear facilities, which was denied.

"This is just a rumour. No attack against Iran's nuclear facilities has taken place," a senior Iranian nuclear official said.

U.S. crude for August delivery was up $1.17 at $137.91 a barrel by 1?34 p.m., after settling up $1.38 on Monday. It hit a record high of $139.89 on June 16.

London Brent crude was up $1.23 at $137.14 a barrel.

Tension over Iran's nuclear programme has played a big part in oil's rise to record levels near $140 a barrel.

The European Union this week imposed new sanctions on Iran, including an asset freeze on its biggest bank.

Western powers suspect Iran, the world's fourth biggest oil exporter, wants to make nuclear arms, but Tehran denies this.

Friday's New York Times quoted U.S. officials as saying Israel, which is believed to have nuclear weapons of its own, had carried out a military exercise, apparently as a rehearsal for a potential bombing of Iran's nuclear facilities.

Analysts are worried heightened tensions between Iran and the West could threaten the Straits of Hormuz, a narrow waterway separating Iran from the Arabian Peninsula through which roughly 40 percent of the world's traded oil flows.