The latest escalation between Iran and Israel is causing oil watchers to fear supply disruptions.

• Analysts warned that Israel may now target Iranian oil infrastructure following the latest missile attack.
• On Tuesday, Israel was targeted by a ballistic missile strike from Iran in response to the recent killing of Hezbollah leader Hassan Nasrallah and an Iranian commander in Lebanon.

The escalating conflict in the Middle East poses a genuine threat to crude supplies, as seen by oil watchers after Iran launched a ballistic missile attack on Israel.

On Tuesday, Iran retaliated against Israel for killing Hezbollah leader Hassan Nasrallah and an Iranian commander in Lebanon by launching a strike.

Analysts informed CNBC that Israel may soon target Iranian oil infrastructure as a response.

""Oil supply may be disrupted due to the Middle East conflict, according to Saul Kavonic, senior energy analyst at MST Marquee," said Kavonic."

The latest developments could be a gamechanger, as traders have been experiencing "geopolitical risk fatigue" for a long time and have been dismissing threats of oil supply disruptions resulting from the Middle East and Ukraine situations.

The conflict in Iran is putting up to 4% of the global oil supply at risk, and an attack or tighter sanctions could cause oil prices to reach $100 per barrel again, according to Kavonic.

The recent missile attack by Iran was a response to Israel's deployment of ground troops in southern Lebanon, which escalated its offensive against Hezbollah, an Iran-backed militant group. Despite the launch of 200 missiles, most of them were intercepted by Israeli and U.S. defenses, and no fatalities were reported in Israel.

The escalation of Israel's offensive on Hezbollah led to a 5% increase in oil prices in the previous session, before tapering to a 2% climb. Currently, Brent is trading 1.44% higher at $74.62 a barrel, while U.S. West Texas Intermediate futures rose 1.62% to $70.95 per barrel.

The Israel-Hamas conflict, which began in October 2019, has had minimal disruptions to the oil market. However, the oil market is still under pressure due to increased production from the U.S. and decreased demand from China, according to Andy Lipow, president of Lipow Oil Associates.

According to the Energy Information Administration, Iran is the third largest producer among the Organization of the Petroleum Exporting Countries, with daily production of nearly four million barrels of oil.

New phase of the war?

Other analysts echoed Kavonic's warning.

"Bob McNally, president of Rapidan Energy Group, stated on CNBC that as Israel shifts its focus from Gaza to Lebanon and Iran, the conflict is entering a new phase that is more energy-related. He predicts that Israel's response to the missile attack will be disproportionately large."

He predicted that the situation would deteriorate before it improved.

GeoQuant's head of research, Ross Schaap, stated that the organization's Israel-Iran conflict risk analysis model, which has remained three standard deviations above the average trend for the past 12 years, experienced a significant increase following the latest missile strikes.

Schaap stated that "bigger events" are expected, according to the results.

Josh Young, CIO of Bison Interests, stated that the potential strike on Iranian oil infrastructure and the resulting oil supply disruption represents a "significant escalation" by Iran.

If Iranian exports are disrupted due to an attack, Young predicts that oil prices will rise above $100 per barrel.