Oil and copper posted their biggest rally in months on Monday as investors trooped back to riskier assets after Europe threw Spanish banks a lifeline, calming worries about the euro zone debt crisis.

Palladium and platinum also climbed after euro zone finance ministers agreed to lend Spain up to 100 billion euros ($125 billion) for its bank rescue fund, deflating the dollar and boosting the appeal of commodities priced in the greenback.

U.S. grains similarly edged up, although gains were limited as investors looked to a key U.S. government global crop supply and demand report due out on Tuesday.

Gold came off the session's highs with the Spanish rescue tarnishing its safe-haven appeal.

Also supporting commodities was weekend data showing China's imports of commodities including copper, crude oil and iron ore rose in May, defying expectations for a fall and suggesting demand from the world's major commodity buyer remained firm.

But the bigger driver of the rally was the European Union coming to the rescue of ailing Spanish banks, although analysts say the market boost could be a flash in the pan.

"Clearly there is no such thing as a silver bullet for solving the euro zone predicament," said Thomas Lam, chief economist at DMG & Partners Securities.

"If they don't follow up the Spain rescue with additional steps to establish a stronger fiscal framework, I don't think this response by markets is going to be sustained."

Brent crude rose 2.2 percent to $101.61 a barrel by 0352 GMT, its biggest percentage rise since March 1. It hit a session high of $102.21 earlier.

U.S. oil climbed 2.3 percent to $86, its steepest gain since Feb. 21.

Supply disruption fears also aided oil after talks failed between the U.N. nuclear watchdog and key oil producer Iran to unblock a probe into suspected atom bomb research by Tehran.

The International Atomic Energy Agency said no progress had been made in the Friday meeting aimed at sealing a deal on resuming the IAEA's long-stalled investigation.

CHINA DATA SUPPORTS

Three-month copper on the London Metal Exchange rose 2.4 percent to $7,467.25 a tonne, its largest gain since Feb. 21, and rebounding from near six-month lows hit in the previous session.

Shanghai copper rose 2.6 percent, while rubber in Tokyo and Shanghai also rallied.

Chinese data released on Sunday showed the country's copper imports rose nearly 12 percent from April to 419,741 tonnes.

"China's data over the weekend was very encouraging, defying the naysayers. Chinese copper demand is still lackluster but China does need imports and after running down inventories for some time, consumers have to import and restock," said Orient Futures Derivatives department director Andy Du.

Traders have said that a global buyer expecting higher prices in China in coming months had shipped a relatively large shipment of refined copper from the United States to Shanghai in late March, which could have arrived in the city in May.

Production data released on Monday showed China's refined copper output dropped 1.4 percent to a three-month low in May as some smelters undertook plant maintenance amid sluggish demand.

China also imported a record high 6 mln barrels per day of crude oil and more iron ore last month, although analysts have warned against drawing excessively optimistic conclusions, as actual demand from users remained weak and the bulk of oil and copper shipments was likely to have been moved into storage.

Spot gold was up 0.2 percent at $1,597.15 an ounce, off the session high of $1,607.95, with the Spanish news taking some uncertainty out of the market.

Platinum jumped 1.7 percent and palladium climbed 2.4 percent, tracking industrial metals.

Gains in U.S. grains were subdued as investors looked to the U.S. government report on global crop supply and demand due out on Tuesday.

Chicago corn rose 0.2 percent to $5.99-1/4 a bushel, after rising as high as $6.03-3/4, not far from Friday's two-week peak. Soybeans gained 0.6 percent to $14.35-1/4 and wheat rose 0.4 percent to $6.33.