Brent oil price hits new $78 peak

Oil surged to record highs above $78 on Friday as conflict in the Middle East escalated.

Iran's nuclear stand off with the West, and fears over oil supply in Nigeria due to militant attacks also contributed to the rise in prices- which are up nearly 30% this year.

US crude soared as high as $78.40 a barrel in intraday trading. Late Friday afternoon, the August contract was at $77, up 30 cents.

London Brent was 26 cents higher at $76.95, after jumping to a record of $78.03 a barrel earlier in the session.

Israel struck Hizbollah targets and devastated a wide array of Lebanese civilian installations on Friday, drawing mounting world criticism of its tactics, since the Shi'ite fighters seized two of its soldiers and killed eight.

Hizbollah, which wants to trade its captives for prisoners held in Israel, fired more rockets across the frontier.

Iranian President Mahmoud Ahmadinejad on Thursday warned that any Israeli strike on Syria would be considered an attack on the whole Islamic world that would provoke 'a fierce response'. Both Iran and Syria support Hizbollah.

Neither Israel nor Lebanon are oil producers but both lie at the heart of the Middle East, which pumps nearly a third of global output.

OPEC sought to calm the market, saying there were sufficient supplies to meet global demand.

In Iran, Ahmadinejad said yesterday the world's fourth-largest oil exporter would not abandon its right to nuclear technology.

Tehran's case was referred back to the Security Council after it delayed accepting a package of incentives designed to prevent it developing nuclear weapons.

Oil prices averaged $67.67 so far this year, still a long way from the inflation adjusted $87.65 average of 1980, the second oil shock that followed the 1979 Iranian revolution.