New York's main contract, light sweet crude for delivery in August, closed up 79 cents at 74.95 dollars per barrel.

In London, Brent North Sea crude for August delivery settled up 72 cents at 74.39 dollars per barrel.

Renewed Middle East violence also contributed to oil market jitters, as eight Israeli soldiers were killed following an attack by Hezbollah militiamen on an army patrol along Israel's border with Lebanon.

"Obviously, the tension is rising in the Middle East. Things are getting out of control," said Fadel Gheit, a market analyst at Oppenheimer.

"The world is getting much more violent, you see the bombing yesterday in India, you see escalation of violence in Iraq.

"(The) oil market usually reflects global tension. So global tension is rising, oil prices rise," Gheit said.

In Paris, ministers from the Security Council permanent members plus Germany had met to hear a progress report from the EU's foreign policy chief Javier Solana, who had held talks in Brussels with Tehran's top nuclear negotiator Ali Larijani on Tuesday.

The world powers subsequently agreed to send Tehran back to the Security Council.

"The Iranians have given no indication at all that they are ready to engage seriously on the substance of our proposals," French Foreign Minister Philippe Douste-Blazy said in a statement agreed with his colleagues from the United States, Britain, Germany, Russia and China.

"Iran has failed to take the steps needed to allow negotiations to begin ... We express profound disappointment over this situation," he said.

World powers are seeking a rapid response from Iran on a package of economic and political incentives aimed at persuading it to freeze uranium enrichment -- a process needed to fuel a nuclear reactor but which could also be used to make a bomb.

Washington has warned Iran it would be exposing itself to UN Security Council action if it rejects the offer and the US Ambassador to the United Nations, John Bolton, said the Security Council could act "early next week" on a potential draft resolution.

Such a resolution would likely require a complete stop to Iran's uranium enrichment.

Analysts warn that Iran, a key OPEC member and the world's fourth-biggest oil producer, could disrupt its crude exports if hit by economic sanctions.

Although oil prices rose on the news, prices in New York did not pierce the 75.78 dollars all-time-high struck on Friday over geopolitical concerns linked to Iran, but also North Korea.

Meanwhile, the US Department of Energy said crude and gasoline stockpiles both fell last week.

The falls come amid the crucial holiday driving season, and while demand for gasoline, or petrol, is at record highs.

The weekly DoE inventories report showed crude oil reserves fell by six million barrels to 335.3 million over the week ended July 7, compared with a forecasted drop of just 1.3 million barrels.

Gasoline reserves showed a larger-than-forecast fall of 400,000 barrels to 212.7 million, against expectations they would drop by as much as 300,000 barrels.

"The crude figures are the most obviously bullish part of this report," Societe Generale analyst Deborah White said, meaning that this data supported prices more than the gasoline numbers.

earlier related report

UN May Vote On Iran Next Week As Oil Prices Soar

US Ambassador John Bolton said Wednesday he hoped the UN Security Council would be able to take action "early next week" on a draft resolution that would make a halt to Iran's uranium enrichment mandatory.

The council would carry out instructions from the foreign ministers of six major powers that met on Iran in Paris earlier Wednesday following "a disappointing and inadequate" response from Tehran to a package of Western incentives offered in exchange for a halt to its uranium enrichment program.

"We will be consulting here beginning this afternoon to carry out the direction the foreign ministers have given us because of the disappointing and inadequate response from the government of Iran," Bolton told reporters.

"The first step will be to make mandatory the suspension of Iranian uranium enrichment activities," he added. "We hope to move as quickly as possible, ... realistically early next week."

In Paris, the six foreign ministers agreed they had "no choice" but to send the issue back to the council.

"The Iranians have given no indication at all that they are ready to engage seriously on the substance of our proposals," French Foreign Minister Philippe Douste-Blazy said in a joint statement with his colleagues from the United States, Britain, Germany, Russia and China at the Paris meeting.

"We have no choice but to return to the United Nations Security Council and take forward the process that was suspended two months ago," he said.

Douste-Blazy made it clear that if Iran refused to comply with the demand that it suspend uranium enrichment, the Security Council would then consider imposing economic sanctions.

The State Department's number three diplomat Nicholas Burns said in Paris that political directors of the five permanent members of the Security Council -- Britain, China, France, Russia and the United States -- and Germany would meet next week to set a short deadline for Iranian compliance before sanctions are adopted.

He said both China and Russia, which had until now resisted sanctions against Tehran, were now in agreement with the others.

The six world powers have been seeking a positive response from Iran on a package of economic and political incentives designed to persuade it to freeze uranium enrichment -- a process that can be used to make a bomb -- proposed to Tehran on June 6.

The Paris talks gathered Douste-Blazy, his US counterpart Condoleezza Rice, Britain's Margaret Beckett, Russia's Sergei Lavrov, Germany's Frank-Walter Steinmeier and the Chinese Deputy Foreign Minister Zhang Yesui.

In Tehran, President Mahmoud Ahmadinejad repeated Wednesday that Iran would not negotiate on its "undeniable right" to have a nuclear programme.

Iran insists that it only wants to develop nuclear energy although its lack of cooperation with the UN nuclear watchdog and enrichment activities have raised suspicions that it is covertly trying to build an atomic bomb.

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