April 18 (Bloomberg) -- Crude oil traded near a record set earlier today amid concern war may erupt over Iran's nuclear research and cut exports from the world's fourth-largest producer.

Israel may need to take action alone to stop Iran from building nuclear weapons, Avigdor Lieberman, a candidate to become the next Israeli internal security minister, said yesterday. Iran President Mahmoud Ahmadinejad said April 14 Israel was on the road to ``being eliminated,'' Agence France-Presse reported.

``The political tension over Iran is what has kept the market high, and the president seems to want to rub it in as much as possible,'' said Bruce Evers, an oil analyst at Investec Securities in London. ``We may see $70 remain through the end of the month. The situation doesn't seem to be getting any closer to resolution.''

Crude oil for May delivery rose as much as 48 cents, or 0.7 percent, to $70.88 a barrel in electronic trading on the New York Mercantile Exchange. That broke the record of $70.85 set Aug. 30 after Hurricane Katrina wrecked oil and natural gas rigs, platforms and pipelines in the Gulf of Mexico.

Crude traded at $70.80 a barrel, up 40 cents, at 1:52 p.m. London time. Yesterday, futures ended trading at $70.40, the highest closing price since trading started in 1983. Brent crude, the benchmark for two-thirds of the world's crude, traded as high as $72.20 in London, the sixth straight day it's reached a record.

Inflation Threat

Oil has risen 17 percent in the past month. The gains are prompting speculation high energy prices will stoke global inflation and cut into earnings at companies such as Continental Airlines Inc., a U.S. airline struggling to cope with high jet fuel prices.

``If Iran decides for whatever reason to stop shipping oil, or if it wants to go ahead and blockade oil coming out through the Persian Gulf, then we're going to have a lot of problems,'' said Peter Beutel, president of energy consulting firm Cameron Hanover. ``If we get a close over $71, then we're going to have to start picking numbers out of the air again as to how high it can go.''

Gold today extended its rally to a 25-year high on concern inflation will accelerate as oil prices climb. That would force central banks to raise interest rates, slowing economic growth.

Changes in gasoline specifications in the U.S. next month are also worrying traders. The changes are causing refiners to take more time than usual to prepare for the summer driving season, causing gasoline output to fall. Gasoline supplies in the U.S. fell 3.9 million barrels for the week ended April 7, a 2 percent drop from a year ago, the U.S. Energy Department said last week.

``You've also got to bear in mind the risk to the gasoline market in the U.S,'' said Rob Laughlin, a broker at Man Financial Ltd. in London. ``You don't stand in the way of a runaway train.''

Iranian Impasse

The U.S., Israel and Europe allege Iran, OPEC's second-largest exporter, is developing atomic weapons. The UN has called on Iran to halt its nuclear research by the end of the month. Iran, which exports about 2.6 million barrels of crude a day, has said it won't cut exports in retaliation if the United Nations imposes sanctions.

Concern over Iran's intentions grew after Ahmadinejad took office in August. He declared the Nazi Holocaust, in which millions of Jews were killed, was a ``myth'' and said Israel should be ``wiped off the map.''

The New Yorker magazine said in a report on April 8 the U.S. may use air strikes and tactical nuclear weapons to destroy Iran's suspected atomic weapons program, including underground facilities.

A U.S. military strike on Iran would not eliminate the nuclear threat and would spark retaliation against American interests worldwide, said Saudi Arabia's Prince Turki al-Faisal, the kingdom's new ambassador to the U.S.

Saudi Arabia, the world's largest oil exporter, is pumping almost all the oil it can. It couldn't replace Iran's production by itself, al-Faisal said.

``The Iranians have put themselves in a difficult position,'' said Deborah White, a commodities economist with Societe Generale in Paris. ``The last time the U.S. suspected weapons of mass destruction, they invaded Iraq.''

Expensive Gas

The average retail gasoline price in the U.S. rose 0.21 cents to $2.782 a gallon over the weekend, up 24 percent from $2.244 a year ago, the according to AAA, the nation's largest motorist organization.

Gasoline for May delivery traded up as much as 1.13 cents to $2.1775 a gallon. Yesterday, the futures jumped 2.9 percent to $2.1697 a gallon, the highest close since Sept. 29. Prices have risen 46 percent in the past year.

New gasoline standards in the U.S. may make it harder for refiners to meet demand. Methyl tertiary butyl ether, MTBE, is being phased out. Refiners are using ethanol blends to cut pollution.

U.S. gasoline supplies fell 7.9 percent to 207.9 million barrels in the six weeks ended April 7, Energy Department data show.

Chinese President Hu Jintao, who meets U.S. President George W. Bush in Washington this week, said April 16 China's economy grew 10.2 percent in the first quarter, faster than previously forecast. Its first-quarter oil imports rose 25 percent.

The International Energy Agency, an adviser to 26 oil-using nations, said last week demand for crude in the past two years was greater than previously estimated, underpinning higher prices.

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Last Updated: April 18, 2006 09:02 EDT