Brent slips, stays above $125 on supply concerns

* Europe has lowered risks of 'catastrophe' -Geithner

* Brent's upside limited to $126.53/bbl -technicals

* Coming Up: U.S. build permits Dec; 0500 GMT

By Manash Goswami

SINGAPORE, Feb 27 (Reuters) - Brent crude edged lower on Monday and snapped five days of gains, but stayed near 10-month highs above $125 due to concerns over supply disruption as tension rose over Iran's disputed nuclear programme.

Brent's rise of 13 percent in February following an increase of more than 3 percent the previous month pulled down Asian shares, base metals and gold as markets worried the rise in crude prices may hurt the global economy. Oil may also have slipped as investors booked profits following the recent surge.

Brent crude fell 7 cents to $125.40 a barrel by 0233 GMT, after settling at its highest since April 29. U.S. crude declined 24 cents to $109.51, after rising for a seventh straight session and ending at the highest level since May 3.

"Iran is the basis for the spike in oil prices," said Ben Le Brun, a Sydney-based markets analyst at OptionsXpress. "There seems to be some profit taking going on today, but prices are set to rise further as tensions over Iran don't look like they are going to subside anytime soon."

Le Brun expects oil to rise about 5 to 10 percent from current levels because of fears of a disruption in supply from the Middle East.

Iran has sharply stepped up its controversial uranium enrichment drive, the U.N. nuclear agency said on Friday. The increase of work that can have both civilian and military purposes underlines that Tehran has no intention of backing down in a long-running dispute with the West that has sparked fears of war.

FEARS OF SUPPLY DISRUPTION

The U.N. report heightened fears of a supply disruption and could stoke worries in Israel, which has threatened Iran with pre-emptive strikes on nuclear sites. That would send shockwaves across the region and drive oil even higher.

Western powers are increasingly at loggerheads with Iran over its efforts to generate nuclear power. Iran insists it wants to harness atomic energy for peaceful ends, but the West suspects it is trying to acquire nuclear weapons.

Against the backdrop of growing worries over oil supplies, Treasury Secretary Timothy Geithner said the Obama administration was weighing the circumstances that could warrant tapping the nation's strategic oil reserves.

Geithner's comments may have prompted investors to book profits, Le Brun said.

"It is taking a lot of pressure off prices," Le Brun said. "It is definitely in the United States' interest to do so. Oil at this level is very detrimental for the United States and the global economy."

The International Monetary Fund has already flagged higher oil prices as a rising threat to the global economy.

Hedge funds and other large investors raised their bets on rising oil prices last week to the highest level since May, data from the U.S. regulator showed on Friday, as tension in the Middle East drove prices to nine-month peaks.

Speculators increased their net long position on the New York Mercantile Exchange by 25,273 contracts to 259,162, the U.S. Commodity Futures Trading Commission said.

(Editing by Clarence Fernandez)