Global oil prices have spiked since fighting erupted between Israel and Hamas amid speculation about how the conflict could affect energy production in the Middle East.
On Monday, global benchmark Brent Crude rose 4.2 percent to $88.15 a barrel, while US benchmark West Texas Intermediate rose 4.3 percent to $86.38 per barrel.
Prices on Tuesday eased slightly, with Brent Crude and West Texas Intermediate falling 36 cents and 35 cents, respectively.
While neither Israel nor the besieged Gaza Strip are significant oil producers, markets have been jolted by fears that the conflict could lead to wider regional instability.
The Middle East is home to some of the world’s biggest major oil producers, including Iran and Saudi Arabia, as well as key transit routes such as the Strait of Hormuz, which is known as the world’s most important “oil chokepoint”.
Will oil prices keep rising for the foreseeable future?
While much will depend on how the conflict plays out, analysts say the immediate effect on energy prices is likely to be limited.
Unlike the spike in oil prices that followed Russia’s invasion of Ukraine last year, the fighting between Israeli soldiers and Hamas fighters, which has killed more than 1,500 people so far in Israel and Gaza, does not directly involve oil-producing nations.
Morgan Stanley said in a note on Monday that the near-term risk to oil supply was low but that could change if the conflict spread to other countries.