Oil prices rose to near $94 a barrel Monday as increased concerns about the possible escalation of the conflict between Israel and Iran helped crude claw back last week's losses triggered by the International Energy Agency's lower crude demand forecast.

By early afternoon in Europe, benchmark crude for September delivery was up 80 cents at $93.67 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 49 cents to end at $92.87 on Friday.

In London, Brent crude was up $1.56 at $114.51 on the ICE Futures exchange.

Brent's climb to three-month highs was seen spurred by declining crude output in the North Sea — blamed mostly on maintenance shutdowns — and mounting fears of an armed confrontation in the Middle East.

On Sunday, Israeli Prime Minister Benjamin Netanyahu reiterated warnings about the threat from Iran's nuclear program, which Tehran says is only for peaceful aims like generating electricity.

"All threats directed at the Israeli home front are dwarfed by another threat, different in its magnitude and substance, and so I have repeated and shall repeat: Iran must not be allowed to obtain nuclear weapons," Netanyahu told his Cabinet on Sunday. Last week defense officials confirmed that Israel's top-tier missile defense system has been upgraded.

"Intensifying supply jitters spooked the markets following news reports out of Israel indicating a rising possibility of military intervention in Iran," said a report from JBC Energy in Vienna. "While the tone out of Israel has indeed become more aggressive, we still think that Israel is unlikely to take unilateral military action against Iran. However, with U.S. elections only 12 weeks away, this could of course be a political move by Israel to pressure the current US administration to show its hand."

Mark Pervan, senior commodity strategist at ANZ Bank in Melbourne, Australia said attention this week will focus partly on U.S. retail sales for July as an indicator of whether demand for crude could increase or slacken.

"Retail data will give a reasonably good indication of underlying demand," he said. Strong retail figures would lift the oil price, he said. Other U.S. economic data this week includes July industrial production figures.

On Friday, the IEA lowered its forecast for global crude demand for the year to 89.6 million barrels a day from 89.9 million. The agency also cut its forecast for oil demand in 2013 to 90.5 million barrels per day from 90.9 million previously.

The IEA said the reduction was due to a "combination of persistently high prices and a weak economic backdrop."

In other Nymex futures trading, heating oil rose 2.78 cents to $3.0483 per gallon. Natural gas was down 3.3 cents at $2.737 per 1,000 cubic feet. Gasoline was up 3.28 cents at $3.0367 per gallon.


Amy Teibel in Jerusalem contributed to this report.