Oil prices jumped more than 4% Monday morning after a surprise attack on Israel by the Palestinian Islamist group Hamas fueled concerns of broader conflict breaking out in the Middle East region.
West Texas Intermediate (CL=F) and Brent International (BZ=F) futures jumped about 4% to about $86 a barrel and $88 per barrel, respectively. The more than $3.50 rise in WTI crude oil marked the largest intraday move since April.
Hamas over the weekend launched the biggest military assault on Israel in decades. Prime Minister Benjamin Netanyahu said on Monday that Israel's response to the attack will "change the Middle East."
The Middle East accounts for more than 30% of the world's oil production.
"There has been no oil supply disruption," Lipow Oil Associates president Andy Lipow wrote in a note on Monday morning. "The oil market knee jerk reaction is to move higher on the fear that the conflict will spread, eventually drawing Iran into the conflict and impacting the transit of oil through the Strait of Hormuz."
Lipow noted that Iran's involvement will be key in determining how much the conflict could impact oil prices. The Strait of Hormuz, which is located between Oman and Iran, produces 17 million-18 million barrels of oil per day. If closed, that could result in a $20 to $30 per barrel increase in oil prices and a surge in gasoline prices in America.
For now, though, Lipow believes the conflict won't impact gas prices' path downward.
Oil prices have been in focus over the past several months as a surge at the end of September had some analysts calling for $100 per barrel prices amid a supply shock across the market. But those prices had receded recently as "demand destruction" had begun in energy.
Fundstrat's head of research Tom Lee says the lack of oil demand should limit Monday's price spike.
"Expect [oil] to initially rise on geopolitical risk, but demand is weak," Lee wrote in a note to clients on Monday. "So this will fade."
Oil's massive move higher had been flagged by many on the Street as a drag on the economy. Goldman Sachs called the headwind "manageable" while others were concerned about how rising oil prices, combined with other factors like the auto strike, the resumption of student loan payments, and a potential government shutdown, could hit growth.
Josh Schafer is a reporter for Yahoo Finance.
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