Updated from 2:01 p.m. EDT

Oil futures rebounded Thursday on renewed fighting in Lebanon and Iran's vow to continue nuclear development in defiance of Western threats.

Light, sweet crude for August delivery closed up 50 cents to $74.27 a barrel in volatile trading that reflected the contract's expiration. Energy traders have been concerned that the conflict in Israel and Lebanon could widen and drag in Iran, the world's fourth-largest crude producer. Iran backs Hezbollah with weapons and money.

Israel continued to raid positions over the Lebanese border overnight, while its jets again pounded suburbs outside Beirut where Hezbollah militants are based. Lebanon's government says more than 300 people have died in nine days of bombing, which was sparked by Hezbollah's kidnapping of two Israeli soldiers on July 12.

Evacuations of civilians picked up, with the U.S. Marines landing in Beirut Thursday for the first time since 1984. Over half a million people have fled Lebanon since the fighting began nine days ago.

On Wednesday, crude futures declined on speculation the Israeli-Lebanese conflict would end. An unexpected increase in gasoline inventories in the midst of the summer driving season, when demand for gasoline peaks, also fueled declines.

Last week, gasoline inventories rose as refiners increased production and demand slumped by 1.7%. There is nearly 1% more gasoline in storage than last year.

Crude supplies climbed by 200,000 barrels as gasoline demand eased and imports surged. Higher output boosted levels of distillates, which include heating oil and jet fuel, by 1.2 million barrels last week.

The decline in crude futures was having mixed effects on other energies, with heating oil slipping 3 cents to $1.93 a gallon. Gasoline, though, inched up 2 cents to close at $2.24 a gallon on a raft of refinery shutdowns across the country. Valero Energy ( VLO) shut a gasoline production unit at a Louisiana refinery for 20 days, while ConocoPhillips ( COP) shut its refinery in Roxana, Ill. for storm-related repairs.

Forecasts of warmer-than-average summer temperatures in the Northeast and Midwest propelled natural gas prices up by 27 cents to $6.09 per million British thermal units. As recently as Wednesday, forecasters with the National Weather Service had predicted cooler temperatures.

Hotter temperatures helped draw down supplies of natural gas, which some utilities use to generate electricity, last week by 59 billion cubic feet. At 2.7 trillion cubic feet, stockpiles are currently 18% higher than last year and 26% greater than the five-year average, according to the U.S. Energy Department's weekly update.

After rising early in the morning, equities were dragged down by disappointing earnings results from Intel ( INTC) and Qualcomm ( QCOM). Shares of drillers, refiners and oil service companies were getting hammered, with the Amex Oil and Philadelphia Oil Service Indices giving up 1% to 5%.

Energy drillers and refiners ConocoPhillips ( COP), Hess ( HESS) and Sunoco ( SUN) were leading declines on the Amex Oil Index, down 1% to 4%.

Among oil service companies, Weatherford International ( WFT), Noble ( NE) and Rowan Companies ( RDC) were losing the most, from 5% to 8%. Shares of Weatherford were battered after the country's fourth-largest oil service company forecast drilling would remain flat next year, losing 8% to $44.60.

Although earnings in the second quarter more than doubled, Noble's stock was losing 5.7% to $68.27 based on concerns staffing costs were cutting into profits. Investors are worried the rig rental market may be at its peak, with Noble's operating costs jumping 17% from a year ago.

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