Oil Up On US-Iran Scare, Dollar; Saudi Output Stance Cuts Gains

NEW YORK, Aug 25 (Reuters) - Oil prices rose 1 percent on Thursday on U.S.-Iran military tensions in the Gulf and speculation the dollar will fall on a monetary policy speech due from the U.S. Federal Reserve chair.

The market, however, gave back some gains after an interview by Saudi Arabia's energy minister with Reuters raised fresh doubts about a potential OPEC output freeze.

Crude futures rallied toward the close after a U.S. defense official said a U.S. Navy ship fired three warning shots after an Iranian fast-attack craft approached two U.S. ships in the northern Gulf on Wednesday.

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