* UN inspectors declare Iran mission a failure
* Brent in euros reaches record high
* India seeks 100,000 bpd more from Saudi for 2012-13
* Japan may cut Iranian imports 20 pct or more -paper
* COMING UP: EIA inventory data at 1600 GMT (Adds quote para 5, U.S. data, updates prices)
By Zaida Espana
LONDON, Feb 23 (Reuters) - Brent crude oil powered to a nine-month high above $124 per barrel on Thursday lifted by heightened tension between Iran and the West, while Brent prices in euro terms reached their highest ever posing a new headache for Europe.
The U.N. nuclear watchdog's latest mission to Iran failed to budge a defiant Tehran over its disputed nuclear programme, heightening fears that possible military confrontation could lead to supply disruption.
Brent crude for April delivery was up $1.13 at $124.03 by 1405 GMT, having touched an intraday peak of $124.50 per barrel, the highest since early in May 2011.
On a euro basis, Brent futures hit the highest level since the single currency was established in 1999, prompting concern that high prices will take their toll on the struggling economic recovery and further dent demand.
"The price is starting to be a topic of discussion on the public and political level and will have a direct impact on consumer confidence," Olivier Jakob from energy consultancy Petromatrix said. "We already see signs of lower demand in Europe and in the U.S."
The euro has weakened as investors doubted its viability during the sovereign debt crisis, while the dollar attracted money looking for relative safety.
On a dollar basis, Brent prices in dollars were still around 18.9 percent away from their all time highs of $147.5 per barrel in 2008.
U.S. crude futures for April were 14 cents up at $106.42 by 1407 GMT, after settling at a nine-month high of $106.28 a barrel the previous day.
As well as fears about conflict between Iran and the West, thinning supply in the North Sea, and output disruptions in South Sudan, Syria and Yemen lifted front-month Brent futures by more than 10.5 percent.
India has sought an additional 100,000 barrels per day (bpd) from top global oil exporter Saudi Arabia for 2012/13, seen as a move to replace Iranian supplies. According to a Japanese newspaper, Tokyo could cut Iranian imports by 20 percent or more this year.
Tension elsewhere in the Middle East added to investor anxiety. Iraq lived through one of its bloodiest days since U.S. troops pulled out in mid-December with a string of early morning attacks on most Shi'ite targets across the country killed at least 60 and wounded dozens, raising the spectre of widespread sectarian violence.
"With extremely limited buffers to absorb any one of the series of potential geopolitical mishaps, the backdrop of the oil market is getting uneasy, and maintaining a deep short position would not be wise," Barclays analysts warned.
However, the record high Brent prices in euros will send ripples through Europe as it grapples with weak economic data, rising unemployment and struggling peripherial economies.
Data from the United States offered a glimmer of hope, with U.S. claims for unemployment benefits unchanged last week, and giving a fresh sign the battered labor market is healing.
With worries about crude supply and current oil prices, all eyes are on the inventory report to be released by the U.S. Energy Information Administration at 1600 GMT.
Data from the American Petroleum Institute on Wednesday showed crude stockpiles rose by 3.6 million barrels in the week to Feb. 17, well in excess of analysts' expectations for a 500,000 barrel build.
PRICE WORRY
Skyrocketing U.S. gasoline prices have become an issue for the 2012 presidential election season. Three Democratic lawmakers on Wednesday urged the White House to signal it is ready to tap the nation's oil stockpiles.
"The recent strength of the US dollar, the currency in which crude oil is traded, and the sharp rise in the oil price is likely to lead to further rises in the retail price of fuel in Europe and the UK and consumers can be expected to respond by trying to use fuel as efficiently as possible or by cutting back on non-essential travel," Caroline Bain from the Economist Intelligence Unit said.
Despite the gloomy consumption predictions in the OECD, Goldman Sachs analysts expect Brent prices to show further upside this year.
In a report on Thursday, the bank predicted further upside in Brent crude this year but said that with prices currently above its three-month target of $120 per barrel, the U.S. benchmark offers better trading opportunities from June onwards.
Goldman Sachs expects the spread between September U.S. crude and Brent futures to narrow to $5 a barrel in six months following the scheduled June reversal of the Seaway pipeline to carry crude oil from Cushing, Oklahoma to the U.S. Gulf Coast.
By 1401 GMT, the front-month Brent crude premium against U.S. crude narrowed to around $17.70 from close to $21 on Feb. 7 as inventories rose at Cushing, the delivery point for West Texas Intermediate crude. (Reporting by Zaida Espana in London and Florence Tan in Singapore; Additional reporting Simon Falush; Editing by Alison Birrane)
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