UNITED NATIONS -- Iraq flatly rejected U.S. President George W. Bush's demand for a swift and unconditional return of UN arms inspectors on Friday, raising the stakes in their high-risk confrontation and bringing closer the specter of a second Persian Gulf War.

Bush, who did not threaten an attack on Iraq but clearly implied it in his speech on Thursday to the UN General Assembly, took a blunter approach less than 24 hours later, saying he was "highly doubtful" that Iraqi leader Saddam Hussein would meet conditions for averting military action.

Baghdad lived up to his expectations. "We do not accept President Bush's conditions," Iraq's Deputy Prime Minister Tareq Aziz told the Dubai-based Arab satellite television station MBC in an interview broadcast on Friday.

Oil prices leapt with traders saying Aziz's rebuttal raised the likelihood of a U.S. attack on Iraq. The market fears conflict could spread into other countries in the Persian Gulf region, which pumps a quarter of global oil supply, Reuters reported.

Ministers from Russia, Europe and key Arab states at the United Nations piled pressure on Saddam to readmit inspectors responsible for checking Iraq for nuclear, chemical, biological and ballistic weapons.

World financiers were reaching for their calculators and computer models to work out the implications of a second Persian Gulf War. A source in Italy said G7 finance ministers look set to join a chorus of voices warning about the possible impact of a war when they meet later this month.

With U.S. Secretary of State Colin Powell consulting his counterparts on the UN Security Council, Bush made clear he wanted quick movement on a tough new resolution requiring Iraq to disarm, urging UN action in "days and weeks".

Aziz raised the stakes in the ballooning crisis. "The return of inspectors without conditions will not solve the problem ... because we have had a bad experience with them," Aziz said. "Is it clever to repeat an experience that failed and did not prevent aggression?" The White House said that Aziz's rejection meant that Iraq had "something to hide."

UN weapons inspectors were pulled out of Iraq in December 1998 on the eve of U.S.-British bombing raids and have not been permitted to return.

"Is the great diplomacy they are talking about to delay the U.S. aggression four or five months and then to take place after the inspectors had returned?," Aziz asked.

--- President "Highly Doubtful" --- Bush told the UN General Assembly on Thursday that unspecified action against Saddam would be inevitable unless the UN forced Baghdad to destroy weapons of mass destruction.

on Friday Bush said he was not optimistic.

"I am highly doubtful that he'll meet our demands," Bush said. "I hope he does, but I'm highly doubtful. The reason I'm doubtful is he's had 11 years to meet the demands, and for 11 long years he has basically told the United Nations and the world he doesn't care."

Foreign Secretary of Britain Jack Straw, a staunch U.S. ally, said on Friday that Iraq would only agree to the return of UN weapons inspectors if it is "written on their eyeballs" that the alternative is the use of force.

There was an urgency in Bush's tone on the need for a tough new resolution requiring Iraq to disarm. "We expect quick resolution to the issue," he said. "There will be deadlines within the resolution," he said, adding: "We're talking days and weeks, not months and years."

White House spokesman Ari Fleischer said Bush's comments were not intended to mean that war was inevitable.

"The president wants to send the UN a helpful message that he wants them to be relevant, he wants them to come out with something strong and concrete around which the world can rally," Fleischer said.

A Security Council resolution needs a minimum of nine votes in favor and no veto to be adopted. But drafting is not expected to begin for several days. "Next week, the heavy lifting begins," Powell said. He held a separate meeting with members of the EU and said he was "pleased" at their reaction.

Bush turned to the United Nations under pressure from foreign leaders and members of Congress.

--- Forging an Alliance --- Like his father before him who raised a coalition to drive Iraq out of Kuwait in the 1991 Persian Gulf War, the president faces the task of persuading allies to ensure Iraqi compliance.

Powell also met the other four permanent Security Council members -- Russia, Britain, France and China.

"There was complete unanimity on getting the weapons inspectors back into Iraq," Straw told reporters after the talks.

Russia gave no comfort to its former ally Iraq, saying it must obey UN resolutions or face the consequences, but Foreign Minister Igor Ivanov's comments fell short of supporting military action.

"Security Council resolutions are binding. Should Iraq refuse to cooperate with the Security Council, the Iraqi leadership will have to assume responsibility for all possible consequences," Ivanov said.

The European Union said Iraq could not be allowed to waste any more time. "We share fully the deep concerns over Iraq's defiance and over its weapons of mass destruction," Danish Foreign Minister Per Stig Moeller, whose country is current EU president, said after separate talks with Powell and Ivanov.

"We put great value on the decision of President Bush to address the problem of Iraq multilaterally," he said.

Arab officials said Egypt and Jordan had pressed Iraq to allow a resumption of the inspections. In private, Arab officials at the UN General Assembly session said they were pessimistic about the chances of averting an attack on Iraq by the United States.

"We are extremely serious," Bush says Bush and his advisers stressed the United States is prepared to act on its own if the United Nations fails to do so. "I hope the world community knows that we are extremely serious about what we said and we expect a quick resolution to the issue, and that's starting with quick action on a resolution," Bush said.

Vice-President Dick Cheney played down the need for military support from other countries, if the United States used force to confront Iraq. "The fact of the matter is, there really aren't very many out there who can contribute much to the solution," Cheney told a radio program.

Thousands of British troops will start hauling supplies across southern England this weekend in a vast logistics exercise that experts say is part sabre-rattling, part prudent planning for possible war in Iraq.

Cheney said he still hoped to get overwhelming political support for any Iraq mission within weeks.

"My guess is that in the final analysis that we will be able to get out of the Congress a resolution to support whatever the president needs to do and it will pass by overwhelming margins in both houses," he said.