The Israel-Palestine conflict has pushed oil prices higher given the risk of supply disruptions after the Israeli government declared war following attacks by Hamas from the Gaza Strip.

On Monday morning, the price of West Texas Intermediate crude, the US benchmark, was up $2.70 a barrel at $85.50 after the attacks. Brent crude, the international benchmark, climbed $2.50 per barrel to $87.05 as a result.

However, an analyst believes the clashes in the Middle East will have only a "limited" impact on oil prices and the broader global economy, and chances are low that the situation will escalate into a larger regional conflict.

The rise in oil prices following the clashes will be limited if there are no regional flare-ups and the market impact could depend on whether the conflict spreads to other parts of the Middle East, said Shi Hongyu, senior economist of the oil market department at the Economics and Technology Research Institute under China National Petroleum Corp.

Israel and Palestinian territories are not oil producers, but the Middle Eastern region accounts for almost a third of global supply.

However, there is a need to remain vigilant about the risk of further escalation and potential spillover, Shi said.

Previously, Saudi Arabia has expressed a willingness to increase oil production to help reach a US-Israeli-Saudi trilateral agreement. Given the expected prolonged duration of the current Israel-Palestine conflict, it may indeed impact the prospects of reaching such an agreement, he added.

Shares were lower, meanwhile, in most major markets. In Asian trading, Shanghai reopened after a weeklong holiday, closing down 0.4 percent at 3,096.92.

Shanghai-listed Petrochina Co Ltd dropped 0.88 percent to close at 7.91 yuan ($1.09) on Monday, and Sinopec edged 0.16 percent lower to finish the day at 6.06 yuan.

China National Offshore Oil Corp ended down 0.76 percent at 20.98 yuan.