Crude oil prices surged 5% on October 3 after President Joe Biden said the United States was "discussing" the possibility of Israel striking Iran's oil industry in response to Tehran's missile attack on Israel.

Sources out of Tel Aviv said earlier on October 3 that Israel was looking at the possibility of striking Iran’s oil sector in a limited strike in a “significant retaliation” for Iran striking its military bases. Iran said it would respond in kind if Israel were to strike any part of its oil sector in the Persian Gulf. Despite the comments, the US and Iran have been in communication, according to sources in Baghdad, speaking with Al Youm news.

Brent crude oil prices have risen 10% to $77.13 per barrel since Iran's missile barrage on Israel. Biden told reporters: "We're discussing that," when asked if he supported Israel potentially striking Iranian oil sites.

The price increase comes at a critical time for global energy markets, although prices remain below levels seen earlier this year due to weaker demand from China and ample supply from Saudi Arabia.

Iran is the world's seventh-largest oil producer, exporting about half its production, primarily to China.

Concerns are growing about potential blockages in the Strait of Hormuz, through which a third of oil tanker traffic and a fifth of LNG passes.

The escalating violence in the Middle East and the threat of further escalation are now weighing heavily on oil markets, with traders closely watching for any signs of disruption to supply routes.

Biden's comments follow Iran's launch of nearly 200 ballistic missiles towards Israel on Tuesday night, October 1, most of which were reportedly intercepted by Israeli defences.