* Oil sets new record above $143 on heightened Israel-Iran
tensions, weak U.S. dollar.
* Iran says will impose controls on a vital Gulf oil route
if it is attacked.
(Adds fund manager comment, forward curve, updates prices)
By Jane Merriman
LONDON, June 30 (Reuters) - Oil rose more than $3 a barrel
on Monday to a new record above $143, propelled by heightened
market fears of conflict between Israel and Iran over Tehran's
nuclear programme.
A fall in the U.S. dollar to three-week lows versus the euro
helped boost the market.
U.S. light crude <CLc1> was up $2.55 at $142.76 a barrel by
1112 GMT, after a record high of $143.67 a barrel.
London Brent crude <LCOc1> was up $2.76 at $143.07.
"The U.S. dollar is down and there are many high-level
geopolitical news items, particularly in the Middle East, that
are pushing prices up," said Mark Pervan, a senior commodities
analyst at the Australian & New Zealand (ANZ) Bank in Melbourne.
Iran's Revolutionary Guards have said Iran would impose
controls on shipping in the Persian Gulf and Strait of Hormuz if
it were attacked. []
The Strait of Hormuz, a narrow waterway separating Iran from
the Arabian Peninsula, accounts for roughly 40 percent of the
world's traded oil flows.
Iran's foreign minister said on Sunday he did not believe
Israel was in a position to attack his country over its nuclear
programme.
SUPPLY CONSTRAINTS
Oil prices have jumped more than 40 percent this year,
extending a six-year rally, in response to Middle East tensions,
plus expectations that supply will struggle to keep pace with
rising demand from emerging economies such as China and India.
Concern over long-term supply constraints have also pushed
up the forward price of oil. Oil is currently priced between
$135 and $139 a barrel out to December 2016.
The market, as a result, is sensitive to any supply
disruptions.
A succession of militant attacks on Nigeria's oil facilities
that have shut a fifth of the country's output since early 2006
has helped drive the market higher.
A flood of cash from investors seeking alternatives to
sagging global equity markets and to hedge against inflation has
also contributed to oil's rise.
"Demand from the investment side has been boosted by problems
in the financial sector as well as a desire for
diversification," said Frances Hudson, investment director,
strategy at asset manager Standard Life Investments.
"Also, inflation concerns encourage investment in real
assets such as oil and gold."
Some have blamed investor flows into oil or so-called
speculative money for the market's rapid climb since the start
of this year, others say it is more to do with the tighter
balance between supply and demand.
Tony Hayward, chief executive of international oil company
BP Plc <BP.L> said: "This is a fundamental signal, this is not
about speculation." []
The market will watch U.S. economic indicators due later on
Monday as well as the European Central Bank's interest rates
decision on Thursday for further guidance on the U.S. dollar.
(Additional reporting by Fayen Wong; editing by James Jukwey)
