Oil prices have remained near to record highs of $78 a barrel after Israel intensified its attacks on Lebanon.Growing international tension over the hostilities and concerns about their impact on regional stability also hit stock markets around the world.

US markets dropped in early trading, shares having fallen across Europe and closed well down in Japan.

Oil producers body Opec said it was concerned with the price spike but stressed the market was well supplied.

Threat to growth?

The price of a barrel of US, light sweet crude had fallen back to $77.42 by mid-afternoon in European trading, still up 72 cents.

Brent crude, meanwhile, was trading up 71 cents at $77.40 after hitting a high of $78.03.

Israel continued to bomb targets within Lebanon after the abduction of two soldiers by the militant group Hezbollah.

Although neither Israel nor Lebanon are oil producers, the violence has increased tensions in the Middle East, a region which accounts for about a quarter of the world’s oil.

Analysts said oil could soon move above $80 a barrel if there was no imminent end to hostilities.

“If this carries on, you can see the oil price going to $80,” said Elissa Bayer, a director at stockbrokers Insinger DeBeaufort.

Stability aim

Opec called for calm, saying prices were being driven up by geopolitical tensions and that the market was well-supplied with oil.

“Opec has noted with concern the strong upward pressure on oil prices of the past few days and wishes to reassure the market of its continuing commitment to order and stability, to the benefit of producers and consumers alike,” it said in a statement.

But selling was the order of the day as investors worried about the impact of higher oil prices on company profits.

The Dow Jones industrial average was trading down 55.5 points at 10791, having sustained its second successive triple-digit loss on Thursday.

Japan’s Nikkei-225 index fell 252.71 points, or 1.67%, to close at 14,891.37 while shares fell in London, Paris and Frankfurt.

“We are certainly in unchartered territory,” said Victor Shum, an energy analyst at Purvin & Getz in Singapore.

“I would not be surprised if $80 is attained soon with this slew of geopolitical events in a tight market.”