Oil prices rose on Tuesday amid concerns that the Iran-Israel conflict could escalate, raising the risk of further unrest and potential disruptions to oil supplies from the key Middle East producing region.

Brent crude futures rose 34 cents, or 0.5%, to $73.57 a barrel by 0340 GMT. U.S. West Texas Intermediate crude futures rose 29 cents, or 0.4%, to $72.06. Both contracts rose more than 2% earlier in the session.

Oil prices fell more than 1% on Monday amid hopes that the conflict would ease after media reports that Iran was seeking to end hostilities.

However, concerns grew after U.S. President Donald Trump urged "everyone" to evacuate the Iranian capital, Tehran, in a social media post.

The fighting continued into its fifth day on Tuesday, with Iranian media reporting explosions and heavy air defense fire in Tehran. In Israel, air raid sirens sounded in Tel Aviv in response to the Iranian missiles.

"The conflict between Iran and Israel is still fresh and heated, and investor sentiment may still be holding on to 'war risk,'" Priyanka Sachdeva, senior market analyst at Phillip Nova, said in an email.

"Increased volatility and caution ahead of the Fed's policy decision further warrant a quicker oil price reaction," Sachdeva added, referring to the meeting of the U.S. Federal Open Market Committee, which guides interest rate decisions, which begins on Tuesday.

However, much of the market is focused on the uncertainty surrounding the Iran-Israel feud.

Iran is the third-largest producer among members of the Organization of the Petroleum Exporting Countries. The concern is that the fighting could disrupt its oil supplies and drive up prices.

U.S. media late Monday reported Trump had proposed new talks with Iran on a nuclear deal, even as another report of an incident involving shipping in the Gulf of Oman highlighted the risks for companies moving oil and fuel supplies in the region. (alg)

Source: Reuters