LONDON, Aug 26 Reuters Oil prices rose 1 on Monday on renewed concerns that an escalating Gaza conflict could disrupt regional oil supplies, extending gains from Friday when the prospect of U.S. interest rate cuts lifted the global economic and fuel demand outlook.

Brent crude futures climbed 79 cents, or 1, to 79.81 a barrel by 0910 GMT, while U.S. crude futures were at 75.63 a barrel, up 80 cents, or 1.07.

In one of the biggest clashes in more than 10 months of border warfare, Hezbollah fired hundreds of rockets and drones into Israel on Sunday, as Israel39;s military said it struck Lebanon with around 100 jets to thwart a larger attack.

The clash raises fears the war in Gaza conflict risks becoming a regional conflict that would draw in Hezbollah39;s backer Iran and Israel39;s main ally the United States, though so far no oil output has been affected.

Oil prices continue to rise due to the weekend39;s attacks between Israel and Hezbollah. However, the situation seems to have calmed down again, which is why gains remained limited, Commerzbank analyst Carsten Fritsch said.

Both oil benchmarks gained more than 2 on Friday after U.S. Federal Reserve Chair Jerome Powell endorsed the start of interest rate cuts.

The prospect of easing monetary policy boosted sentiment across the commodity complex, ANZ analysts said in a note.

Investors remain cautious over the actions of the Organization of Petroleum Exporting Countries OPEC and its allies, or OPEC, which has plans…