$87 a barrel on Wednesday after an explosion injured 10 people on a bus in Tel Aviv, a development that has the potential to seriously complicate diplomatic efforts to broker a cease-fire between Israel and Islamic militant group Hamas.
By early afternoon in Europe, benchmark oil for January delivery was up 68 cents to $87.42 a barrel in electronic trading on the New York Mercantile Exchange. On Tuesday, the contract fell $2.53 to finish at $86.75 on signs that a deal between the two warring sides might be close.
U.S. Secretary of State Hillary Rodham Clinton and other world diplomats were shuttling between Jerusalem, the West Bank and Cairo, trying to piece together a truce that would satisfy the two foes after a week of fighting.
Those efforts could be imperiled by an explosion on a bus in Tel Aviv, Israel's second-largest city, which injured 10 people.
Olivier Jakob of Petromatrix in Switzerland said the lack of a cease-fire which seemed nearer on Tuesday means the market "needs to reconsider having some geopolitical premium for the long weekend."
U.S. markets will be closed Thursday and close early on Friday because of Thanksgiving.
The possibility of a disruption in oil supplies when violence in the Middle East spikes often translates into higher crude prices, but ample inventories of crude and refined products as well as the European Union's delay in approving more bailout funds for Greece have kept a lid on prices.
Analysts at CME Group say they expect this week's inventory data from the U.S. Energy Information Administration to show "another build in crude oil supplies in the range of 750,000 to 1.0 million barrels."
Brent crude, which is used to price international varieties of oil, was up $1.02 to $110.85 a barrel in London.
Other energy futures on the New York Mercantile Exchange:
— Heating oil rose 3.2 cents to $3.0803 a gallon.
— Wholesale gasoline added 2.15 cents to $2.7099 per gallon.
— Natural gas fell 3.9 cents to $3.793 per 1,000 cubic feet.
Pamela Sampson in Bangkok contributed to this report.