Oil edges up after report of US strike on Iran's Qeshm Island

Nov 3 (Reuters) - Oil prices rose more than $1 on Tuesday, as an Iranian official said a deal to the end the war was far off, while the United States struck Iran's Qeshm Island, fuelling concerns over the escalation of hostilities and risks to energy supplies.

US West Texas Intermediate crude was up $1.6, or 1.66%, at $98.06 a barrel while Brent crude futures rose $1.84, or 1.76%, to $106.61 a barrel by 0744 GMT.

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Both benchmarks had dropped more than 7% on Monday as talks between Iranian and Qatar officials lifted hopes for an end to the US-Israeli war with Iran that were soon dashed.

A US official said on Monday the US had struck Iran's Qeshm Island. Some officials described the assaults as defensive and aimed at preventing Iran from attacking commercial ships in the Strait of Hormuz.

On Tuesday, a senior Iranian official told Reuters that both countries were far from reaching a deal to end the war, and Tehran would not accept Washington's "excessive demands".

Iran's parliament speaker Qalibaf said Tehran had given Washington a "strong and rational response," adding, "The ball is in the US' court," according to state media.

"The report added a degree of risk premium back into the oil price," said Tim Waterer, chief market analyst at KCM Trade.

"Just when markets were starting to price in a more diplomatic path, this reminder of ongoing military activity has flipped the tone."

The war started in late February has become a leading cause of high gasoline prices weighing on voters, and Trump is under pressure to end the conflict, with mid-term elections set for Tuesday.

"For now, the risk of supply disruptions continues to provide a floor for prices, while uncertainty over Washington's next move, political developments and traders' reluctance to carry aggressive positions are capping the upside," said Priyanka Sachdeva, head of market insight at Phillip Nova.

Brent ended October at its highest in six months on concerns that the conflict could escalate again after the US midterm elections.

A Ukrainian drone attack damaged an oil refinery in the Russian city of Yaroslavl, governor Mikhail Evrayev said on Tuesday.

Russia launched a massive overnight strike on Ukrainian energy facilities in the Vinnytsia, Dnipropetrovsk and Kharkiv regions, Interfax news agency said, citing the defence ministry.

Additionally, the US will bring together delegations from Ukraine and Russia in Abu Dhabi on November 10 and 11 to discuss ending the war, post-war security pacts and de-escalation efforts.

Reporting by Noel John in Bengaluru and Sam Li in Beijing; Editing by Lincoln Feast, Stephen Coates and Clarence Fernandez

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