Traders don't expect a big crude shock just yet

As oil traders prepare for the market to open after the sudden eruption of war in Israel, one question is key: will the conflict spread to the rest of the region?

Crude traders don't expect a massive price surge as there's no immediate threat to supply. But all eyes are on Iran, a major oil producer and key backer of the Hamas group that launched this weekend's offensive on Israel.

A retaliatory strike against the Islamic Republic would inflame fears over the Strait of Hormuz, the vital shipping artery which Tehran has previously threatened to shutter. There's also the prospect of the US cracking down again on a resurgent flow of Iranian oil exports.

The "oil-disruption scenario," according to Bob McNally, president of Rapidan Energy Group and a former White House official, "would be if conflict spread to Iran." For now, that looks unlikely, he said.

But the threat has escalated just as global crude supplies have been depleted by months of sharp production cutbacks by Saudi Arabia and Russia, which last month briefly pushed Brent futures to almost $100 a barrel.

"It is unlikely to impact oil supply in the short term," said hedge fund trader Pierre Andurand, founder of Andurand Capital Management LLP. "But it could eventually have an impact on supply and prices."

No-one expects Riyadh - which has been negotiating with Washington over normalizing relations with Israel - to turn off the taps in solidarity with the Palestinians now.