Oil prices pared earlier gains on Friday on mixed reports out of the Middle East but remained about 1% higher on worries that tensions in Israel and Gaza could spread into a wider conflict that could disrupt global oil supplies.
Brent futures rose 68 cents, or 0.8%, to $88.61 a barrel by 11:34 a.m. EDT (1534 GMT), while U.S. West Texas Intermediate (WTI) crude rose 68 cents, or 0.8%, to $83.89.
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An official of the militant Hamas group conditioned the release of hostages in Gaza on a ceasefire in Israel's bombardment of the Palestinian enclave, launched after a deadly Hamas rampage into southern Israel nearly three weeks ago.
Israel says it is preparing a ground invasion, but has been urged by the U.S. and Arab countries to delay an operation that would multiply the number of civilian casualties in the densely populated coastal strip and might ignite a wider conflict.
Earlier in what has proved to be a choppy session, oil prices soared by more than $2 a barrel after the U.S military struck Iranian targets in Syria, before briefly turning negative as markets digested various reports on mediation talks with Hamas and Israel led by Qatar in coordination with the U.S..
Iranian Foreign Minister Hossein Amirabdollahian said at the United Nations on Thursday that if Israel's offensive against Hamas did not stop, the United States will "not be spared from this fire".
Separately, projectiles hit two Egyptian Red Sea towns on Friday injuring several people, sources and officials said, showing the risk of regional spillover from the conflict.
Israeli forces carried out their biggest Gaza ground attack in their 20-day war with Hamas overnight, after Prime Minister Benjamin Netanyahu said Israeli troops were still preparing for a full ground invasion.
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