Oil rises as Iran-Israel conflict spurs uncertainty

Oil prices climbed on Tuesday on concerns the Iran-Israel conflict may intensify, raising the risk of further unrest and the potential disruption of oil supply from the key Middle East producing region.

Brent crude futures rose 34 cents, or 0.5 per cent, to $73.57 a barrel as of 0340 GMT. US West Texas Intermediate crude was up 29 cents, or 0.4 per cent, at $72.06. Both contracts rose more than 2.0 per cent earlier in the trading session.

Oil prices settled more than 1.0 per cent lower on Monday on hopes that the conflict would ease after media reports Iran was seeking an end to hostilities, according to Reuters.

However, concerns have escalated after US President Donald Trump in a social media post urged "everyone" to evacuate the Iranian capital of Tehran.

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

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

"Added volatility and caution ahead of the Fed policy decision are further ensuring higher-paced price reactions in oil," Sachdeva added, referring to the US Federal Open Market Committee meeting, which guides interest rate decisions, that begins on Tuesday.

Still, most of the market is focused on the uncertainty around the Iran-Israel hostilities.

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

US media on Monday night is reporting Trump is proposing renewed talks with Iran on a nuclear deal, even as other reports of an incident involving shipping in the Gulf of Oman highlight the risks to companies moving oil and fuel supplies in the region.