Oil prices have surged as concerns increase that a widening regional conflict in the Middle East could disrupt global flows of crude oil.

Brent crude futures settled up US$3.72, or +5%, at US$77.62 a barrel. The other key measure of oil, U.S. West Texas Intermediate (WTI) crude futures settled up US$3.61, or +5.2%, to US$73.71.

Both hit one-month intra-day highs.

Reuters is reporting market fears are rising over the possibility that Israel might target Iranian oil infrastructure, which could provoke retaliation.

Asked on Thursday if he would support Israel striking Iran’s oil facilities, U.S. President Joe Biden told reporters “we’re discussing that.”

He added: “There is nothing going to happen today.”

The Pentagon said it was in discussions with Israeli officials about their possible response to Iran’s missile attack but declined to offer details.

“We are certainly talking to them about their response, but what their response might be, I’m just not going to speculate further on. But we do continue to engage with them,” said Pentagon spokesperson Sabrina Singh.

Iran is a member of the Organization of the Petroleum Exporting Countries with production of around 3.2 million barrels per day or 3% of global output.

“This is going to really test the mettle of the market because up until now the risk to supply has been downplayed, as there has been no disruption, so this could be a game changer,” said Phil Flynn, senior analyst for Price Futures Group.

There are concerns that such escalation could prompt Iran to block the Strait of Hormuz or attack Saudi infrastructure, as it did in 2019, said Panmure Gordon analyst Ashley Kelty.

The strait is a key logistical chokepoint through which a fifth of daily oil supply passes.

“Our estimates for Q4 2024 were US$75/bbl prior to the recent headline, but if these attacks come to fruition prices could average levels closer to US$78-$80/bbl,” StoneX analyst Alex Hodes said in a note Thursday.

Ministers from Gulf Arab states and Iran attended a meeting of Asian nations hosted by Qatar to discuss de-escalating hostilities between Israel and Iran, three sources told Reuters on Thursday.

The Gulf Arab states sought to reassure Iran of their neutrality in the conflict on concerns that further violence could threaten Gulf oil facilities, two of the sources said.