HOUSTON: Oil jumped 3% on Tuesday to its highest level this month, as further attacks on ships in the Red Sea prompted fears of shipping disruptions and on hopes of interest rate cuts that could boost economic growth and fuel demand.

Brent crude futures were up $2.41, or 3.1%, at $81.48 a barrel by 11:52 am ET (1652 GMT). US West Texas Intermediate crude rose by $2.36, or 3.2%, to $75.92.

The rally, in thin trade with some markets closed for holidays, added to last week’s gains of about 3% after Houthi attacks on ships worried investors and as the Israel-Hamas conflict showed no sign of easing.

“There’s plenty of geopolitical tensions today in terms of the Middle East and it has given some angst here to the security of the transit of oil and other goods,” said John Kilduff, partner with Again Capital LLC.

Explosions in the Red Sea off the coast of Yemen were reported on Tuesday after sightings of unmanned aircraft and missiles in two separate incidents, a British maritime authority said.

An Israeli minister on Tuesday hinted that the country had retaliated in Iraq, Yemen and Iran for attacks carried out against it as the war with Hamas-led Palestinian in the Gaza Strip widens to other areas of the region.

Despite concern about the Middle East and the re-routing of ships, actual supply has not yet been affected. Maersk on Sunday announced the restart of shipping routes through the Red Sea, easing the concerns to some extent.

Shipping companies had stopped sending vessels through the Red Sea and imposed surcharges for re-routing ships. The Red Sea connects with the Suez Canal, a major shipping route used for about 12% of global trade.