Oil prices edged lower in early Asian trading hours on Tuesday as traders booked profits after prices rallied to their highest in over a month on Monday amid fears that the Middle East could be on the brink of a region-wide war.

World oil prices rallied more than two percent Monday as tensions escalated in the crude-rich Middle East one year after the deadly Hamas attacks on Israel.

Oil prices extended gains on Monday, with Brent nearing $80 to build on last week's steepest weekly jump since early 2023, driven by fears of a wider Middle East conflict and potential disruption to exports from the major oil-producing region.

Oil prices have continued to rise due to fears of oil production strikes in Iran. Sky News Business Reporter Edward Boyd said Brent crude oil has lifted to above $US81 a barrel which is the “highest level since August”.