Crude-oil futures pared their early strong gains Monday as Israel kept up its air raids in the Gaza Strip, raising fears that escalating geopolitical tensions could lead to a disruption of oil supplies from the Middle East. In thin trading, light, sweet crude for February delivery was last up 49 cents, or 1.3%, to $38.18 a barrel in electronic trading on Globex. Earlier, the contract had soared to an intraday high of $42.20 a barrel. "The strikes by Israel have heightened tensions in the region, increasing the geopolitical risk premium in the price on fears that there could be some disruption to crude supplies from the Middle East," said Michael Davies, an analyst at Sucden Financial Research, in a note. "However, the risk of any significant disruption remains low and the move seems a little overdone and can possibly be explained by the thin market conditions over the holiday period," Davies said. On Friday, oil futures ended up $2.36, or 6.7%, at $37.71 a barrel on the New York Mercantile Exchange. Despite the gain, oil finished the week down 11%. Oil futures have tumbled nearly 60% this year. In the Gaza Strip, Israeli air strikes aimed at targets linked to militant group Hamas continued for a third day, the BBC reported on Monday. See full story. Hamas said 300 Palestinians have died since Saturday, while the United Nations said that 56 civilians are dead, according to the report. In Israel, a second person was killed by a militant rocket, the report said. Israeli Defense Minister Ehud Barak said Israel was not fighting the people of Gaza but was in "a war to the bitter end" with Hamas, the BBC reported. "Although ongoing tensions could keep things fairly well bid for a while, we suspect that prices will eventually buckle under the relentless barrage of poor macroeconomic headlines, as the latter should overpower the bullish impact of the geopolitics, admittedly a stark departure from what we were seeing in the markets a few years ago when the roles were reversed," said Edward Meir, an analyst at MF Global, in a research note. Also on Globex Monday, reformulated gasoline for February delivery gained 1 cent to 90 cents a gallon and February heating oil added 1 cent to $1.28 a gallon. February natural gas futures rose 21 cents, or 4%, to $6.02 per million British thermal units. Elsewhere in the commodity markets, gold futures rose 1%.

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