Oil prices experienced a significant jump on Monday, driven by concerns about the potential for a protracted conflict in the oil-producing region.

Hamas launched a sweeping attack on Israel on Saturday, resulting in hundreds of casualties.

Israel responded with airstrikes on the Gaza Strip, and on Sunday, the Israeli government declared a state of war, with Prime Minister Benjamin Netanyahu vowing vengeance and warning of a long and challenging conflict ahead.

The surprise attack on Israel by Hamas over the weekend triggered fears of a supply shock, causing oil to surge by as much as 5%.

Investors are closely monitoring the situation, with risk sentiment taking a hit as a result of the turmoil in the Middle East.

Kyle Rodda, senior market analyst at Capital.com, commented, “The events over the weekend obviously destabilize the region; investors have a lot to mull over. Ultimately, these events tend to have only a short-term impact on financial markets, and it’s probable that this time will be the same. Investors could be jumpy for a couple of days until the risks of escalation have clearly diminished, though.”

The repercussions of the Israel attacks were felt throughout Middle East markets on Sunday, leading to a decline in stocks.

The region’s major equities indices saw losses, with Israel’s benchmark TA-35 stock index experiencing its most significant drop in over three years, falling by 6.5%.

Iran plays a crucial role as both a major oil producer and a supporter of Hamas. Any retaliatory actions against Tehran could jeopardize the passage of vessels through the Strait of Hormuz, a vital shipping route Iran has previously threatened to close.

Rising oil prices could exacerbate already-high global inflationary pressures, with investors still debating the likelihood of another interest rate hike by the Federal Reserve this year.

The Wall Street Journal reported that Iran may have helped plan the attack, a development that, if confirmed, could widen the conflict’s scope.

Additionally, the conflict may have significant implications for talks aimed at normalizing relations between Saudi Arabia and Israel.

Movements in oil prices will continue to serve as a barometer for broader market concerns surrounding the ongoing conflict.