Oil prices jumped on Monday as markets across the world digest an escalating conflict in the Middle East.

Israel formally declared war on Hamas on Monday after a surprise attack over the weekend. More than 1,100 people have been killed across Israel and Gaza.

Brent crude futures (BZ=F) were more than 4.2% higher by the end of the trading day in London, jumping as high as $89 a barrel, before settling around $88.10 This followed the biggest weekly price drop since March last week.

"Oil prices will be under the spotlight, with supply disruption fears providing a reason for Brent and WTI (CL=F) to rally. However, a repeat of the 1973 oil price spike seems unlikely, given the diminished role of OPEC and a changed diplomatic landscape," said Chris Beauchamp, chief market analyst at IG.

Read more: Gold price drop bellwether for inflation sentiment

The FTSE 100 (^FTSE) and European stocks, meanwhile, were down, with London's premier index falling 0.1% by the end of the day, having been supported throughout the day by energy stocks.

The DAX (^GDAXI) in Germany and France's CAC (^FCHI) were 0.8% and 0.7% lower respectively.

Over in the US, indexes also fell, with the S&P 500 (^GSPC) down 0.3%, the Dow (^DJI) losing 0.1% and the tech-heavy Nasdaq (^IXIC) down 0.8%.

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