Oil fell towards $108 a barrel on Tuesday as investors brushed off Iran's threat to halt exports if the West tightens sanctions and focused on a fragile world economy and its impact on oil demand growth.

Concerns over the state of the economy were revived after the world's largest maker of tractors and excavators Caterpillar Inc. warned the economy was slowing faster than expected. The gloomy outlook overshadowed supply risks from the Middle East and existing outages in the Atlantic Basin.

Brent crude had fallen $1.33 to $108.11 a barrel by 1339 GMT. U.S. oil fell $1.90 to $86.75 a barrel.

"The main bearish driver is the state of the economy," said Filip Petersson, an analyst at SEB in Stockholm. "And that's taken all markets down quite a bit."

Prices were also pressured by expectations that U.S. oil inventories likely rose for the third straight week as imports recovered, a preliminary Reuters poll of analysts showed.

Crude inventories were expected to have risen 1.7 million barrels for the week ended Oct. 19. All seven analysts saw a build in stockpiles. In the previous week, domestic oil stocks rose 2.9 million barrels to 369.2 million barrels, data from the Energy Information Administration (EIA) showed.

But oil's downside was checked by supply outages and the potential for disruption.

Iran's Oil Minister Rostam Qasemi said Tehran could stop oil exports if pressure from Western sanctions intensified. At around one million barrels per day (bpd), the country's oil exports have already fallen to the lowest in more than two decades.

The drop in Iranian supply is supporting oil prices and hurting Tehran's revenues, though higher output from fellow OPEC producers Saudi Arabia and Iraq has more than made up for the shortfall, say industry sources.

Output from OPEC member Nigeria has taken a knock, with Shell declaring force majeure on exports of Bonny and Forcados crudes after problems brought on by oil theft and flooding in the Niger Delta.

Violence in the Middle East also helped support prices.

At least seven people were killed and dozens wounded in gun battles in the Lebanese capital Beirut and coastal Tripoli on Monday. The clashes have heightened fears that Syria's civil war with its sectarian dimensions is now seeping into Lebanon, and may spread further across the region.

"The risk of the civil war in Syria spilling over into Lebanon and the situation in Bahrain escalating further following the protests in recent days should also not be underestimated," said Commerzbank.

Supply worries also increased after police in Kuwait used teargas, stun grenades and baton charges to disperse tens of thousands of demonstrators protesting changes to the electoral law which the opposition has called a constitutional coup by the government. (Additional reporting by Manash Goswami in Singapore; editing by James Jukwey and Keiron Henderson)