Oil leapt towards $112 a barrel on Thursday on renewed worries over potential supply disruptions from the Middle East as a war of words escalated between Israel and Iran. Israeli Prime Minister Benjamin Netanyahu is due to issue an ultimatum to Iran when he speaks later today at the United Nations: halt a disputed nuclear drive or risk coming under military attack. Comments from Iran about "neutralizing" all efforts to sabotage its nuclear facilities had already pushed oil higher in earlier trade. "Nothing has improved in the relationship between Iran and Israel and there is unpleasantness throughout the Middle East," said David Morrison, analyst at GFT Global. "The danger is that we have a nasty flare-up." Brent crude [LCOCV1 111.56 1.52 (+1.38%) ] was trading at $111.75, up $1.71, while U.S. light, sweet crude oil [CLCV1 90.95 0.97 (+1.08%) ] gained $1.15 to trade at $91.13. Iranian President Mahmoud Ahmadinejad said in a speech before the U.N. General Assembly that Iran is under threat of military action from "uncivilized Zionists", a clear reference to Israel. Oil also gained support from data that showed crude and refined product stockpiles in the United States, the world's biggest oil consumer, fell unexpectedly last week as crude imports plunged. Domestic crude stocks declined by 2.45 million barrels to 365.18 million barrels, the Energy Information Administration said, against a forecast increase of 900,000 barrels. Gasoline inventories dropped by 481,000 barrels to 195.83 million barrels, against expectations of an increase of 200,000 barrels. That in part helped U.S. RBOB gasoline futures[RBCV1 3.1583 0.0772 (+2.51%) ] jump 11.40 cents, or 3.8 percent, on Wednesday. Investors were also hopeful that Spain's budget could nudge Madrid towards a rescue program and allow the European Central Bank to launch into a new bond-buying plan. (Read More: Spain Gears Up for Day of Cuts After Riots.)

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