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STORY: Oil prices surged more than 2% on Monday (October 9).l

Markets were rattled by military clashes between Israel and the Palestinian Islamist group Hamas.

The fighting has led to more political uncertainty across the Middle East and raised concerns about supplies.

Both Brent crude and U.S. West Texas Intermediate crude had jumped over $4 a barrel earlier, before easing slightly.

The surge in oil prices reversed last week's downtrend, which had been the largest weekly drop since March.

Brent had fallen just over a tenth due to concerns about high interest rates and their impact on global demand.

But that focus changed when on Saturday (October 7) Hamas launched the largest military assault on Israel in decades.

The assault killed hundreds of Israelis and led to a wave of retaliatory Israeli air strikes on Gaza that have also killed hundreds of Palestinians.

One leading energy analyst told Reuters the risk premium on oil was rising.

That was due to the potential for the crisis to spread to nearby oil producing neighbors like Iran and Saudi Arabia.

The violence also threatens to hurt U.S. efforts to broker a deal between Saudi Arabia and Israel.

It would lead to the kingdom normalizing ties with Israel in return for a defense deal between Washington and Riyadh.

Saudi officials reportedly told the White House on Friday (October 6) they were willing to raise output next year as part of the proposed Israel deal.

An increase in Saudi output would have helped to relieve tightness in the market after months of supply cuts from key producers like Saudi Arabia and Russia.