WASHINGTON, July 31: Oil prices rose on Monday as Israel’s moratorium on air strikes in Lebanon proved short-lived.

September crude rose 41 cents to $73.65 a barrel after Israel jets struck southern Lebanon on Monday in support of ground troops fighting Hezbollah. The attacks came 12 hours after Israel announced a 48-hour cessation of bombing raids.

Heating oil jumped 1 cent to $1.95 a gallon and wholesale gasoline was off 1 cent at $2.22 a gallon.

A leak in one of Russia's major pipelines to Europe was also supporting prices. The 2,485-mile pipeline, located near Russia’s western border with Ukraine and Belarus, carries over 1.2 million barrels of oil per day.

Even though Lebanon and Israel do not produce much oil, energy prices have been rising and falling according to developments in the conflict out of concern big oil producers will be drawn in. Traders have been most concerned that Iran, the world’s fourth-largest producer, would join the fray because it backs the militants with money and weapons.

Oil prices have become closely tied with geopolitics because of slimming supplies and soaring demand. Thanks to the booming Chinese and Indian economies, oil consumption has climbed to 85 million barrels a day this year. And while there's enough to meet demand --- Saudi Arabia has around 2 million barrels of spare capacity --- there's not enough left over to cover long-term disruptions to global supplies.

Sky-high prices have boosted profits and revenues at a wide spectrum of energy companies, from the world’s largest public oil company, Exxon-Mobil, to small oilfield service providers. Last week, Exxon, Chevron, BP, Royal Dutch Shell and Conoco-Phillips reported second-quarter earnings rose at least 18pc thanks to fat refining margins and high oil prices. Lower natural gas prices during the quarter were offset by soaring oil prices.

Meanwhile, forecasts of hot weather in the US sent natural gas soaring 72 cents to $7.91 per million British thermal units. The fuel is used by some utilities to generate electricity and power air conditioners.