Oil prices have jumped on concerns that the situation in Israel and Gaza could disrupt output from the Middle East.
Brent crude was up $2.28, or 2.7%, to $86.86 a barrel by 0859 GMT, while U.S. West Texas Intermediate crude was at $85.23 a barrel, up $2.44 or nearly 3%. Both benchmarks spiked by more than $4 a barrel earlier in the session.
The surge in oil prices reversed last week’s downtrend – the largest weekly decline since March – in which Brent fell about 11% and WTI retreated more than 8% as a darkening macroeconomic outlook intensified concerns about global demand.
Israel and Palestinian territories are not oil producers but the Middle Eastern region accounts for almost a third of global supply.
Hamas’s assault on Israel was the biggest escalation between the two sides for decades.
Energy analyst Saul Kavonic told the BBC that global oil prices have risen “due to the prospect of a wider conflagration that could spread to nearby major oil-producing nations such as Iran and Saudi Arabia”.
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“If the conflict envelops Iran, which has been accused of supporting the Hamas attacks, up to 3% of global oil supply is at risk,” Kavonic added.
Caroline Bain, chief commodities economist at Capital Economics, told the BBC’s Today programme that Iran had been increasing oil production over the course of this year despite US sanctions.
Kavonic said that about a fifth of global supply would be “held hostage” if passage through the Strait of Hormuz, a vital oil trading route is disrupted.
The Strait of Hormuz is crucial for the main oil exporters in the Gulf region, whose economies are built around oil and gas production.
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