Oil prices vaulted to a new peak over $75 a barrel on Friday as investment funds snapped up crude futures and tension mounted over Iran's nuclear intentions.

U.S. light crude oil for June delivery settled up $1.48 at $75.17 a barrel, after hitting a record $75.35, while London Brent crude settled up $1.39 at $74.57 a barrel.

U.S. oil has rallied about 23 percent this year on supply concerns and as investment funds seeking high returns among diverse assets poured billions of dollars into commodities.

Funds stepped in again on Friday.

Click here to visit FOXBusiness.com's Energy page.

"It's turned around, and it seems to be related to the injection of capital that we believe is coming from pension and mutual funds," said Deborah White of SG CIB Commodities. "All week it has been like this, a cross-commodities rally."

Base metals markets also raced to record highs on Friday.

Adding support, a war of words between Iran and the West over Tehran's resolve to continue its nuclear program triggered concern that oil supplies from the world's fourth biggest exporter could be disrupted.

The Iranian president said on Friday that Iran should rely on domestically produced gasoline starting in September, a move that would make the country less vulnerable to sanctions.

A senior U.S. official said on Friday that Russia must stop any arms deals with Iran. Washington wants Moscow to cancel the planned sale to Iran of surface-to-air missiles.

"It's time for countries to use their leverage against Iran," said senior State Department official Nicholas Burns.

Russia strongly opposes the use of sanctions against Iran.

Iran has scoffed at the idea of U.S. military action to halt its nuclear activities and gave no hint of compromise on Thursday before a visit by U.N. inspectors to assess Iranian compliance with Security Council demands.

President Bush has vowed to stop Iran from getting atomic weapons and has refused to rule out military options, including nuclear strikes, if diplomacy fails.

OPEC POWERLESS

Members of the Organization of Petroleum Exporting Countries were set to meet informally in Qatar on the sidelines of discussions between energy consumers and producers.

But several OPEC ministers have said there is little more the group can do to bring down high prices as the cartel is already pumping at near full capacity.

"OPEC can deal with issues it can control, but ... we can't do anything about the politics in the world," Algerian Oil Minister Chakib Khelil said.

He said oil markets were well supplied and crude inventories were high, so any action to increase output would only be a gesture.

"The market would see through that," he said. "If we do something, it has to be credible. Why should we hide the truth?"

OPEC has been pumping 29.9 million barrels per day in April, up 100,000 bpd from March, tanker-tracking consultancy Petrologistics said on Friday.

U.S. Energy Secretary Sam Bodman said on Friday he would not ask OPEC to pump more oil, saying he agrees with the cartel's assessment that the markets are well supplied.

U.S. gasoline retail prices are spiking toward $3 a gallon, a level not seen since last year's hurricanes knocked out a quarter of the nation's fuel supply, and gas stations along the East Coast were reporting some disruptions due to problems transitioning to summer-grades.

Investment funds appear to be testing how high the oil price can go before demand suffers, Banc of America analyst Richard Savage said.

"We haven't seen significant demand destruction," he said. "The key thing here is that high prices are not due to fundamentals. The market is trying to find that break point."

High prices have yet to halt oil demand growth in the United States or in fast-growing China.

Click here to visit FOXBusiness.com's Energy page.