"There's a possibility of a $5 spike in premium over the next week if there's escalation...if there's ground movement, if the Israeli army moves its infantry into the Gaza Strip," Andrew Su, CEO of Compass Global Markets in Sydney told CNBC's "Squawk Box," on Thursday.

Benchmark Brent crude oil prices rose more than 1 percent toward $110 a barrel on Wednesday, snapping a two-day slide after the offensive by Israel. U.S. December crude rose 94 cents to settle at $86.32 a barrel, off the session high of $86.65.

Hamas's military chief was killed when his car was hit by an Israeli air strike, the Palestinian Islamist group said, as multiple Israeli attacks hit the Gaza Strip in retaliation for rockets launched at Israel, according to Reuters.

(Read More: Middle East Trouble Could Steal Focus From Growth Concerns)

An Israeli official said the attack on Hamas's top commander was not the end of the assault on the coastal territory and more strikes would follow. Middle East tensions are already high in the region as the Syrian conflict drags into its 20th month.

The U.N. Security Council held a closed emergency meeting on Thursday to discuss Israeli strikes against the Gaza Strip as Israel threatened a wider offensive in the Palestinian enclave to stem rocket salvoes by Hamas militants, Reuters reported.

"What's more concerning really is not what's really happening in the Gaza Strip, but what's happening between Israel and Syria," Compass Global's Su said. "Syria has a much bigger capacity to hit back if Israel decides to launch any attack and I think what's happening now is they're already exchanging fire. So people are not focusing on the right area I think."

The next major risk event determining the risk premium could be the result of Israel's election, scheduled for January 22, 2013. If Prime Minister Benjamin Netanyahu secures a popular mandate, that may embolden his administration to pursue a harder line against Iran, analysts have said.

—By CNBC's Sri Jegarajah