HIGHLIGHTS: Iraq Rejects Bush's Demand of Unconditional Return of UN Weapons Inspectors to Baghdad||Oil Prices Leap up as Iraq's Rebuttal Raises Likelihood of War||International Community Piles up Pressure on Saddam to Readmit UN Inspectors||Financiers & Economists Deeply Worried about Impact of War on World Economy||Bush Wants UN Action within Days or Weeks||Drafting within UN Security Council Corridors not Expected to Begin Before Several Days||Russia Warns Iraq UN Inspectors Must Return But Still Strongly Opposes Military Action||In Private, Arab Officials Pessimistic about Averting Attack on Iraq||Anglo-American Military Build up in the Gulf Signifies Prudent Planning for Possible War in Iraq, Military Experts Say|| STORY: Iraq flatly rejected President Bush's demand for a swift and unconditional return of U.N. arms inspectors on Friday, raising the stakes in their high-risk confrontation and bringing closer the specter of a second Gulf War.

Bush, who did not threaten an attack on Iraq but clearly implied it in his speech on Thursday to the U.N. 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 Gulf region, which pumps a quarter of global oil supply.

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 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 Secretary of State Colin Powell consulting his counterparts on the U.N. Security Council, Bush made clear he wanted quick movement on a tough new resolution requiring Iraq to disarm, urging U.N. 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."

U.N. 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.

WAR NEEDS NOT BE INEVITABLE, US OFFICIAL

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

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

"The president wants to send the U.N. 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.

RUSSIA WARNS IRAQ BUT STILL STRONGLY OPPOSES MILITARY ACTION

Like his father before him who raised a coalition to drive Iraq out of Kuwait in the 1991 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 U.N. resolutions or face the consequences, but Foreign Minister Igor Ivanov's comments fell short of supporting military action.

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 U.N. General Assembly session said they were pessimistic about the chances of averting an attack on Iraq by the United States.

MILITARY BUILD UP SIGNIFIES PRUDENT PLANNING FOR POSSIBLE WAR IN IRAQ, MILITARY EXPERTS SAY

Thousands of British troops will start hauling supplies across southern England this weekend in a vast logistics exercise that experts say is part saber-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.

PHOTO CAPTION

(Top L) A missile loaded U.S. Air Force F-16C Falcon fighter takes off from Incirlik air base in southern Turkey on Friday, Sept. 13, 2002 for a mission over the No-Fly Zone in northern Iraq to monitor Iraqi compliance with United Nations Security Council Resolutions. (AP Photo/Burhan Ozbilici)
- Sep 13 1:53 PM ET

(Top R) U.S. Secretary of State Colin Powell, left, shakes hands with Sheik Hamad bin Jassem bin Jabor Al Thani, foreign minister of Qatar, at a hotel in New York, Friday, Sept. 13, 2002. - Sep 13 1:37 PM ET

(Bottom L) President Bush, center background, and Secretary of State Colin Powell, beside him, meet with Central African leaders at the Waldorf Astoria Hotel in New York, Friday, Sept. 13, 2002. Bush told reporters during the meeting that he expects the United Nations to act as soon as possible on a resolution to set a firm deadline for Iraq to disarm its weapons.( AP Photo/Doug Mills)

(Bottom R) Israeli Foreign Minister Shimon Peres addresses members of the media after the conclusion of his meeting with National Security Advisor Condelezza Rice at the White House, Friday, Sept 13, 2002, in Washington. Peres acknowledged that Iraq could respond to a U.S. military attack by launching missiles against Israel. (AP Photo/Pablo Martinez Monsivais)
- Sep 13 10:33 PM ET