U.S. crude oil rose more than 1% on Thursday, one day after the Federal Reserve slashed interest rates for the first time in more than four years and as tensions in the Middle East continued to escalate.

The Fed surprised the market on Wednesday with a bigger-than-expected cut of a half percentage point. Oil prices, however, closed slightly lower as rate reductions had largely already been priced in.

The U.S. benchmark has now clawed back its losses this year, though it is still down more than 11% in the third quarter.

Phil Flynn, senior market analyst at the Price Futures Group, said the Fed cut appears to be “shaking out some hedge fund shorts from their bearish oil obsession.”

Here are Thursday’s closing energy prices:

• West Texas Intermediate October contract: $71.95 per barrel, up $1.04, or 1.47%. Year to date, U.S. crude oil is up less than 1%.
• Brent November contract: $74.88 per barrel, up $1.23, or 1.67%. Year to date, the global benchmark is down nearly 3%.
• RBOB Gasoline October contract: $2.06 per gallon, up 2.45%. Year to date, gasoline is down roughly 2%.
• Natural Gas October contract: $2.348 per thousand cubic feet, up 2.8%. Year to date, gas is down more than 6%.

Crude futures are on the rebound again as tensions soar between Israel and the Iranian-backed militia group Hezbollah in Lebanon. Prices are also finding support after U.S. oil stockpiles fell by 1.6 million barrels last week.

Israeli warplanes and artillery carried out strikes targeting Hezbollah in southern Lebanon on Thursday. The strikes come after pagers and walkie-talkies used by the militia exploded this week, killing dozens and wounding thousands across Lebanon. U.S. officials told NBC News that Israel was behind the pager attack. Israel has not taken responsibility for the attacks.

Israeli Defense Minister Yoav Gallant said Wednesday that his country’s focus is shifting from Gaza to the northern border with Lebanon, where some 60,000 Israelis have been evacuated, as a “new phase” of the war begins.

Oil market analysts have warned for months that an all-out war between Israel and Hezbollah, which until now have traded rocket fire, could force OPEC member Iran to directly intervene, raising the risk of disruptions to Middle East crude oil supplies.

“We continue to highlight Lebanon as the main pathway to oil disruption through direct Iranian involvement in a wider regional war,” Helima Croft, head of global commodity strategy at RBC Capital Markets, told clients in a Thursday note.

U.S. crude oil edged lower Wednesday with the Federal Reserve’s pivotal decision on interest rates later this afternoon unlikely to provide much in the way of support.

“In theory a rate cut is supportive for oil prices but we’ve seen prices rallying in recent days, likely pricing this in already, hence the response may be muted,” said Matt Smith, lead oil analyst for the Americas at Kpler.

The oil market has been rattled this month by worries about a growing imbalance between supply and demand. The U.S. benchmark is down about 13% in the third quarter, while global benchmark Brent has fallen about 15%.

Here are Wednesday’s energy prices:

• West Texas Intermediate October contract: $71.07 per barrel, down 12 cents, or 0.17%. Year to date, U.S. crude oil is down about 1%.
• Brent November contract: $73.45 per barrel, down 25 cents, or 0.34%. Year to date, the global benchmark has fallen more than 4%.
• RBOB Gasoline October contract: $1.9972 per gallon, down 0.23%. Year to date, gasoline has dropped about 5%.
• Natural Gas October contract: $2.297 per thousand cubic feet, down 1.16%. Year to date, gas has pulled back more than 8%.

Consumption in China is slowing as electric vehicle sales surge in the world’s largest crude importer. At the same time, OPEC+ is expected to increase production in December as output in the U.S., Canada, Brazil and Guyana remains strong.

“We are not expecting fireworks in the sky following Fed rate cuts,” said Manish Raj, managing director of Velandera Energy Partners. 

“The Fed action is unlikely to suddenly spur demand, which has otherwise been soft,” Raj said. “Nobody is hitting the gas stations just because the Fed decides to cut the rates today.”

Andy Lipow, president of Lipow Oil Associates, said a quarter-point cut is probably already priced into the oil market. “A 50 basis point cut is slightly supportive of the oil market since it translates into a weaker dollar and stronger prices for dollar denominated commodities,” Lipow said.

U.S. commercial crude stockpiles fell by 1.6 million barrels for the week ended Sept. 13, according to the Energy Information Administration. Meanwhile, gasoline inventories rose by 100,000 barrels, according to the data.

Geopolitical tensions are also escalating in the Middle East again as fears grow that a major conflict between Israel and the Iran-backed militia Hezbollah is on the horizon. Hundreds of pagers exploded in Lebanon Tuesday in an attack targeting Hezbollah militia members.

U.S. crude oil traded above $71 per barrel on Tuesday, as optimism grows that the Federal Reserve will cut interest rates this week and production is still disrupted in the Gulf of Mexico.

“Supply disruptions are making their mark, including Hurricane Francine’s impact on US Gulf of Mexico infrastructure,” said Svetlana Tretyakova, senior analyst at Rystad Energy.

“Expectations of a US Federal Reserve rate cut are gaining momentum, which could be good news for demand,” Tretyakova said.

Here are Tuesday’s energy prices:

• West Texas Intermediate October contract: $71.20 per barrel, up $1.11, or 1.58%. Year to date, U.S. crude oil is down about 1%.
• Brent November contract: $73.61 per barrel, up 86 cents, or about 1.18%. Year to date, the global benchmark has fallen nearly 5%.
• RBOB Gasoline October contract: $1.9929 per gallon, up 1.25%. Year to date, gasoline has declined more than 5%.
• Natural Gas October contract: $2.419 per thousand cubic feet, up 1.94%. Year to date, gas has pulled back nearly 5%.

More than 200,000 barrels per day remained offline in the Gulf as of Monday due to Hurricane Francine, according to the Bureau of Safety and Environmental Enforcement. Production from undamaged facilities will be brought back online immediately after checks have been completed, according to the agency.

The oil market is also bracing for the Fed’s decision Wednesday on interest rates. The central bank is widely expected to lower rates, though Wall Street is divided on the magnitude of the cut.

U.S. crude oil is down about 13% this quarter while Brent has fallen around 15% as demand slows in China, the world’s largest crude importer, and OPEC+ plans to increase production in December.

“Supply has been pretty strong,” Chevron CEO Mike Wirth told CNBC’s “Squawk on the Street” Tuesday.

“We’ve seen growth in supply primarily in the Americas,” Wirth said. “We’ve got OPEC with some capacity offline and demand has been a little less than most people expected as we see a slowing economy here, we’ve seen slower growth in China than I think most people expected.”