Oil prices leapt by more than 10% today to above $40 a barrel after the Israeli assault on Gaza, with energy chiefs warning the cost of crude could be back above $100 within a year.

London's Brent crude rose almost $5 at one stage today, peaking at $43.18, before easing to $41.35 — still up $2.98 or 7.7% on the day. New York crude was up $3.08 or 8.2% at $40.79, although trading volumes were thin because of the festive holidays.

Gold, a traditional safe haven, leapt $16 to $885.28 an ounce as Israeli Prime Minister Ehud Olmert forecast a “long, difficult and painful operation” in Gaza.

Traders reckoned the fighting, now in its third day, could see a repeat of what happened in 2006 when Israel's month-long bombardment of Lebanon drove oil to a then-record $78.

But analysts were cautiously optimistic the price will fall back once the Gaza offensive is over, as it did in 2006. “The only danger regarding energy production is the conflict escalating to involve neighbouring countries, which does not look likely at this juncture,” said Jonathan Kornafel, Asia Director of Hudson Capital Energy, a US-based options house.

Hardline clerics in Iran have called on Muslims to defend Palestinians in Gaza but it sounded more like angry rhetoric than a threat. Standard Chartered analyst Serene Gardiner pointed out Iran “isn't in the best of economic shape due to low oil prices” and does not want to jeopardise further its own oil revenues.

The oil price has dived by than two-thirds since its summer peak of $147 a barrel due to the threat of global recession. However, International Energy Agency chief economist Fatih Birol warned today that oil firms are now slashing investment in drilling and production and this will help to drive prices higher again once Western economies start to recover.

“A serious supply-demand problem will emerge in 2010,” said Birol, who forecast prices will rise back above $100 a barrel between 2010 and 2015.