Brent rises above $110 as Iran tensions swing into focus

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* Iran President increases rhetoric against Israel

* Coming Up: U.S. consumer confidence index; 1400 GMT

By Ramya Venugopal

SINGAPORE, Sept 25 (Reuters) - Brent crude climbed above $110 a barrel on Tuesday, recovering from a more than 1 percent drop in the previous session, as escalating tensions surrounding Iran offset concerns about weak demand in a still-fragile global economy.

Washington on Monday tightened sanctions against Iran to curb its nuclear ambitions, while Tehran increased its rhetoric against Israel, intensifying worries about the conflict between the two and the impact on crude supplies from the region.

"The markets have been flipflopping between worries over weak demand and tight supplies, so I'm not surprised to see some volatility in prices," said Natalie Rampono, commodity strategist with ANZ in Melbourne.

November Brent futures rose 34 cents to $110.15 per barrel at 0248 GMT, while U.S. crude futures gained 39 cents to $92.32 a barrel. Both contracts shed more than $1 on Monday as weak German economic data underlined demand worries.

While the underlying sentiment remains weak as investors fret about the effectiveness of the recently announced stimulus measures and the impact on global oil demand, the focus on Tuesday was on the increasing tensions in the Middle East.

IRAN TENSIONS IN FOCUS

The U.S. government officially linked Iran's state oil company to the country's Islamic Revolutionary Guard Corps on Monday, allowing Washington to apply new sanctions on foreign banks dealing with the company.

That could worsen an already tense situation as Iran struggles to find ways to ship its oil to consumer nations, especially in Asia, with the unavailability of European insurance for its shipments deterring buyers.

The U.S. and European Union imposed sanctions on Iran earlier this year to curb Tehran's nuclear ambitions, which the Middle Eastern nation says are aimed at peaceful purposes.

Adding to worries, Iran's president on Monday ignored a United Nations warning and increased rhetoric against Israel at the U.N. General Assembly in New York.

President Mahmoud Ahmadinejad's comments come on the heels of a statement by a senior army official of the Revolutionary Guard who warned of a pre-emptive strike against Israel.

Looking ahead, investor attention will focus on political risks in the final months of the year, with elections in the U.S. and a leadership transition in China, the world's biggest consumers of oil.

The market is also waiting for U.S. inventory data for clues on demand from the world's biggest consumer of oil. U.S. crude oil stockpiles likely rose last week for the third straight week, while gasoline and distillate stockpiles were also seen higher, a preliminary Reuters poll showed on Monday.

The American Petroleum Institute will release its inventory report later in the day, while the EIA will issue its data on Wednesday. (Editing by Himani Sarkar) (ramya.venugopal@thomsonreuters.com; +65 6870 3826; Reuters Messaging: ramya.venugopal.thomsonreuters.com@reuters.net)

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