The fighting between Israel and militants in Lebanon is being closely watched by oil traders who are concerned that it might spread to other Middle East countries and interrupt supplies. Prices started to edge back up again after the Israeli army mobilised large numbers of reserve troops leading to speculation that it is preparing for a ground invasion of Lebanon.
Soon after the conflict started, the price of Brent crude in London rose to a new record, above 78 dollars a barrel. The fall earlier this week was partly due to comments by the head of the US Federal Reserve Ben Bernanke who said surging energy prices were having an impact on economic growth and so demand for oil was decreasing.
The latest price rise is also because traders are focusing on supply disruptions due to production problems at US refineries and worried about the threat of storm damage during the hurricane season there.