(Reuters) - Brent crude steadied below $110 a barrel on Tuesday, after losing more than 1 percent in the previous session, as concerns about weak demand in a still-fragile global economy offset escalating tensions surrounding Iran.

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

Investors have been taking stock after a series of stimulus measures from central banks in the U.S., Europe and Japan, and are coming around to the view that the measures may not do much to boost growth in the economy.

"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.

"Unless we see the stimulus responses reflected in the underlying economic data, such as industrial production, the demand outlook will not improve."

November Brent futures were down 11 cents at $109.70 per barrel at 0631 GMT, after climbing to a high of $110.20 earlier in the session. U.S. crude futures rose 6 cents to $91.99 a barrel. Both contracts ended the previous session about $1 lower on demand concerns.

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


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.


Still demand worries continue to weigh, especially after data from Germany on Monday showed that business sentiment dropped for a fifth straight month.

Germany's relative resilience to the euro zone debt crisis has been steadily fraying as its firms see falling demand for their products from European partners and signs of a slowdown in other markets.

"The primary source of fear is now perhaps that all-enveloping grayness and the consequences of an extended period of slow growth, rather than abrupt economic downturns," Barclays analysts said in a report.

"The geopolitical context is such that oil price risks are biased to the upside in a world of fairly limited spare capacity," they added.

Investors 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, ANZ's Rampano said.

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 and Joseph Radford)

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