Brent firm on Iran's threats but mood cautious

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* Weak European market keeps price rise in check

* Coming up: U.S. API weekly crude stocks; 2130 GMT

By Seng Li Peng

SINGAPORE, Jan 10 (Reuters) - Brent crude rose above $112.50 on Tuesday as tension over Iran's nuclear programme ratcheted up and on unrest in Nigeria, but gains are being capped by persistent worries about the strength of European economies after weak German data.

Iran confirmed on Monday that it has started uranium enrichment at the Fordow bunker near the city of Qom, which the U.S. state department called a 'further escalation' of violations of U.N. resolutions.

The tensions over Iran's disputed nuclear programme, which Tehran insists is for peaceful purposes, have led to Iran threatening to shut the Strait of Hormuz, a critical shipping chokepoint for oil.

Brent February crude climbed 33 cents to $112.78 a barrel by 0403 GMT. U.S.

"resolutions.The tensions over Iran's disputed nuclear programme, which Tehran insists is for peaceful purposes, have led to Iran threatening to shut the Strait of Hormuz, a critical shipping chokepoint for oil.Brent February crude climbed 33 cents to $112.78 a barrel by 0403 GMT"February crude rose 42 cents to $101.73 a barrel.

"Despite demand conditions being relatively weak, oil prices are still above $100 because of the geopolitical tensions. There is a floor on prices at the moment," said Natalie Robertson of ANZ.

She said the European Union's meeting on Jan. 23 on whether to embargo Iran's oil will have a significant impact on price direction as the EU is collectively one of the largest buyers of Iranian crude, rivalling China.

The bloc buys about 500,000 barrels per day (bpd) of Iran's 2.6 million barrels per day (bpd) in exports. Iran in total produces around 3.5 million bpd and is the second-largest producer of oil after Saudi Arabia.

Analysts said the market will remain volatile as investors are torn between possible supply disruptions and weak European demand.

"I think the market is a little bit more cautious this morning," said Robertson.

Another possible supply issue is a second day of nationwide strikes in Nigeria on Tuesday to protest against the removal of fuel subsidies.

The country's crude oil output had remained normal as of early Tuesday despite the strike, sources at two international oil companies and the state firm told Reuters.

German industrial output fell 0.6 percent in November, declining slightly more than expected on a drop in intermediate and capital goods and underlining the weak state of European economies.

German Chancellor Angela Merkel and French President Nicolas Sarkozy warned Greece it will get no more bailout funds until it agrees with creditor banks on a bond swap and a deal to avert a potential default.

"Merkel and Sarkozy discussed issues that were ongoing from last year," said Robertson.

"In addition, the industrial numbers didn't come in as well as the market had expected. Germany may have gone through a recession in the last quarter." (Editing by Michael Urquhart)

Energy.