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Oil soars as Hamas attack on Israel sparks war

Benchmark oil contracts Brent and WTI soar more than 5% before easing

Equity markets held the line but world oil prices spiked on Monday after Hamas launched a shock deadly attack on Israel, which has declared war on Gaza, sparking fear of an escalating conflict in the crude-rich Middle East.

Benchmark oil contracts Brent and WTI soared more than five percent in earlier Asian deals before easing back somewhat.

The worsening crisis sent shockwaves through global equity markets, although energy companies were boosted by higher oil prices which lift their profits and revenues.

The dollar, yen and Swiss franc, as well as gold, won strong support as they benefited from their status as a haven investment in times of heightened geopolitical turmoil.

"The surprise attack by Hamas has fuelled concerns about further instability in the Middle East which could in turn disrupt oil flows at a time when the market is already extremely tight and prices are high," said Craig Erlam, senior market analyst with OANDA.

For Stone X analyst Fawad Razaqzada, with markets now in "risk off" mode, "investors are worried that the retaliation by Israel is going to be -- as it has already -- severe and will raise the tensions between Israel and many other countries around the region, including, of course, Iran."

Wall Street and main European equity markets held their nerve, even so, with the Dow dipping a toe into the red minutes into the session while the tech-heavy Nasdaq shed around half of one percent.

London equities climbed slightly aided by strong gains for oil giants BP and Shell, but Paris and Frankfurt slipped half of one percent.

Wall Street had rallied Friday on data showing a forecast-busting jump in new jobs but a slowdown in wage growth.

The Mideast crisis has fanned concerns about crucial supplies at a time when supply worries are already high owing to output cuts by Saudi Arabia and Russia.

It has also renewed fears about the impact on inflation, with energy costs a key driver of spiking prices, giving a fresh headache to central banks as they try to ease up on interest rate hikes to avoid recessions.

"The shocking attacks in Israel have sent the price of oil soaring, as investors assess the potential for the conflict to disrupt supply in the Middle East, if other countries are drawn in," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

"With the Israeli government warning of a long and difficult war, there are concerns that deep and incessant retaliative strikes on Gaza could potentially bring Iran into the conflict and have an impact on the flow of energy in the region."

The Bank of Israel launched the sale of up to $30 billion in foreign currency reserves, as it sought to curb volatility in its shekel currency has tumbled to a seven-year low against the dollar.