CALGARY – Oil prices rose on Thursday after Israel and Iran continued to exchange missile attacks overnight and U.S. President Donald Trump’s stance on the conflict kept investors on edge.

Brent crude futures rose $1.60, or 2.1%, to $78.29 a barrel by 1030 ET. U.S. West Texas Intermediate crude for July was up $1.64, or 2.1%, at $78.34. Brent had surged to its highest in nearly five months at $78.50 on June 13, when Israel began its attacks.

Trading volumes were light on Thursday due to a U.S. federal holiday.

The conflict entered its seventh day on Thursday after Israel struck Iranian nuclear sites and Iranian missiles hit an Israeli hospital.

There is still a “healthy risk premium baked into the price as traders wait to see whether the next stage of the Israel–Iran conflict is a U.S. strike or peace talks”, said Tony Sycamore, analyst at trading platform IG.

Goldman Sachs said on Wednesday that a geopolitical risk premium of about $10 a barrel is justified, given lower Iranian supply and risk of wider disruption that could push Brent crude above $90.

Oil Prices May Not Decrease as Tensions Settle

Even if Middle East tensions were to cool off in the coming days, oil prices are probably not headed back to the low-$60 range they were trading at a month ago, said Phil Flynn, senior analyst for the Price Futures Group.

“I think this (conflict) knocks oil out of its complacency,” said Flynn. “I would argue that the market has been underplaying geopolitical risk.”

President Trump told reporters on Wednesday that he had yet to decide whether the U.S. will join Israel in its attacks on Iran.

As a result of the unpredictability that has long characterized Trump’s foreign policy, “markets remain jittery, awaiting firmer signals that could influence global oil supply and regional stability” said Priyanka Sachdeva, analyst at Phillip Nova.

The risk of major energy disruption will rise if Iran feels existentially threatened, and U.S. entry into the conflict could trigger direct attacks on tankers and energy infrastructure, said RBC Capital analyst Helima Croft.

Iran is the third-largest producer among members of the Organization of the Petroleum Exporting Countries, extracting about 3.3 million barrels per day (bpd) of crude oil.

About 18 million to 21 million bpd of oil and oil products move through the Strait of Hormuz along Iran‘s southern coast and there is widespread concern the fighting could disrupt trade flows.

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(Reporting by Amanda Stephenson, Enes Tunagur, Colleen Howe and Sam LiEditing by David Goodman and Deepa Babington)