A war between Islamist group Hamas and Israel poses one of the most significant geopolitical risks to oil markets since Russia's invasion of Ukraine last year.

Unlike Russia, one of the world's top oil and gas producers, Israel has very modest energy production. But there is a risk the war could spread to major energy producers in the Middle East and affect oil and gas flows.

While those flows have not yet been affected, analysts and market observers point to several major potential complications if the conflict escalates.

First, the US could tighten or step up enforcement of sanctions on Iran should it be implicated in Hamas' attack on Israel, which could further strain an already undersupplied oil market. Iran could retaliate by disrupting energy flows from Opec neighbours via the Strait of Hormuz.

Second, a deal being brokered by Washington to normalise relations between Saudi Arabia and Israel, which could see the kingdom increase oil output, could be derailed.

How has the oil market reacted so far?

Brent crude jumped by over $5 to above $90 a barrel over the past week since Hamas launched a surprise attack on Israel on October 7.

Analysts and industry insiders, who had expected a stronger rally, acknowledged that the situation differed from the 1973 oil crisis when Saudi Arabia spearheaded an embargo targeted at nations that had supported Israel during the Yom Kippur War, causing prices to skyrocket.

Saudi Arabia and Russia have already announced voluntary supply cuts until the end of 2023, pushing oil prices to 10-month highs in late September before macroeconomic concerns pulled them dramatically lower again last week.

David Goldwyn, a former special envoy for international energy affairs at the US State Department, said fundamentals would remain a bigger driver of prices than the war.

Rob Thummel, senior portfolio manager at Tortoise Capital, said oil prices would be unlikely to rise substantially unless there is disruption in the Strait of Hormuz, the world's most important oil artery carrying a fifth of global supply, caused by Iran or any other country.

What does the conflict mean for Iranian exports?

Despite US sanctions, Iranian crude exports have grown significantly this year, offsetting some of the 1.3 million barrel per day (bpd) voluntary cut by Riyadh and Moscow.

Hamas backer Iran has denied any involvement in the group's attack on Israel. US Treasury Secretary Janet Yellen on Wednesday said she had nothing to announce yet on whether the United States would impose new sanctions on Iran if evidence emerged that the country was involved in the attack.

Iranian Oil Minister Javad Owji was quoted on Friday as saying oil would hit $100 per barrel "on recent developments in the Middle East".

Tighter US sanctions on Tehran would threaten crude supplies and push up energy prices both globally and domestically, something President Joe Biden will be keen to avoid ahead of a 2024 election.

But RBC Capital Markets analyst Helima Croft said it would "likely be difficult" for the Biden administration to continue with its "permissive sanctions regime" that has allowed Iran's oil production to approach pre-2018 levels.

Other analysts don't expect the US to risk supply disruptions, however.

"Given that policy objectives did not target Russian oil flows even at the height of the Russia-Ukraine conflict, we do not expect Iranian oil exports to be constrained either," Macquarie analysts said.

FGE analysts said that the US was unlikely to tighten sanctions without Saudi Arabia agreeing to replace lost Iranian barrels, which they added that they did not see happening.

What becomes of the Saudi-Israeli deal?

Saudi Arabia is putting US-backed plans to normalise ties with Israel on ice, sources familiar with Riyadh's thinking told Reuters on Friday, signalling a rapid reassessment of its foreign policy priorities because of the war between Israel and Hamas.

The US is attempting to broker a rapprochement between Saudi Arabia and Israel, in which the kingdom would normalise ties with Israel in return for a defence deal with Washington.

Saudi Arabia told the White House it is willing to boost oil production early next year to help secure the deal, the Wall Street Journal reported last week.

Washington has said the efforts should continue but Ben Cahill of US-based think tank Center for Strategic and International Studies said the talks could now be suspended, closing off an important avenue of US-Saudi cooperation.

How has OPEC+ reacted?

Saudi Arabia's Energy Minister Prince Abdulaziz told CNBC this week - in his first comments since the start of the war - Opec and Opec+ have been through many challenges before and its members were "connected" and their "cohesion should not be challenged".

Iraq's oil ministry spokesman on October 12 said that Opec+, the Organization of the Petroleum Exporting Countries and allies led by Russia, does not make knee-jerk reactions to market challenges.

Russian Deputy Prime Minister Alexander Novak added on Thursday that current oil prices factored in the conflict and reflected the market's belief that risks posed by the clashes were not that high.

Russian President Vladimir Putin said this week Opec+ coordination will continue "for the predictability of the oil market".