Sydney, Dec 31: Oil rose above $96 a barrel on Monday, lifted by mounting political instability in Pakistan and growing tensions between Iran and the United States over Tehran's nuclear ambitions.

US light crude for February delivery rose 41 cents to $96.41 a barrel by 2334 GMT, partially reversing the previous session's decline which was triggered by US economic worries.

Oil closed 62 cents lower at $96 a barrel on Friday. Pakistani electoral officials will hold an Emergency meeting on Monday to decide whether to proceed with a January poll after the nation was plunged into crisis by the assassination of former prime minister and Opposition leader Benazir Bhutto.

Bhutto's party named her 19-year-old son and husband on Sunday to succeed her, but doubts grew about whether a Jan. 8 poll aiming to transform Pakistan from military rule would go ahead.

While Pakistan is not a major crude producer, escalating tensions after Bhutto's assassination have stoked supply concerns in the region.

The South Asian nation, a promising investment story less than a year ago, is also now gripped by fears of capital flight if the political instability deepens. In the Middle East, comments from Iran's Foreign Minister Manouchehr Mottaki on Sunday about Tehran starting its first atomic power plant in mid-2008 added to geopolitical concerns.

Mottaki also told Iranian media that Tehran wants assurances that the United States will accept the results of talks on Iraq before holding a new meeting about ways to end violence in the country. Separately, Iraq plans to boost sales of Kirkuk oil by at least 100,000 barrels per day starting in January and is offering incentives to win back and retain customers, an Iraqi official said on Friday.

Despite the geopolitical jitters, some analysts have said that worries about the health of US economy and its effects on oil demand in the world's top consumer would cap oil's gains. Economic data released on Friday showed a 9 percent decline in sales of new US homes last month, heightening fears of the economy going into recession next year.