Crude oil futures rose more than 1% on Thursday as rising geopolitical risk concerns and expectations of a tighter market in the third quarter outweighed a surprise surge in U.S. crude and gasoline inventories.

There are cross-border tensions between Israel and Hezbollah in Lebanon escalating, fueling fears of a worsening war, with analysts saying any contamination could impact Middle East oil supplies.

Oil prices appear to be heading for their first monthly gain since March, but remain “trapped in range”- said FXTM analyst Lukman Otunuga Market watch. “Bulls are supported by geopolitical tensions and hopes for a demand rebound thanks to the summer driving season.”

Settled pre-month Nymex (CL1:COM) crude for August delivery +1% at USD 81.74/bbl, and August Brent crude (CO1:COM) closed at +1.3% to $86.39/bbl.

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Citi analysts say renewed tensions in the Middle East and in Russia and Ukraine create the potential for higher oil prices and that the balance would need to be significantly relaxed before significant downward pressure would emerge.

However, this year, oil markets have shown a tendency to overshoot “either due to geopolitical concerns or supply and demand expectations, followed by a sharp recalibration,” Citi said, so “we recommend against chasing this rally as current price levels appear too high for us.”

Citi continues to see an average third-quarter oil deficit of $200,000. barrels per day, but notes uncertainty around China due to the reduction in refinery turnover in that country.

“It is also striking that the key catalysts for oil markets’ strong performance over the summer, namely the strong pull from East of Suez and a hot gasoline market, appear to have so far remained rather muted, perhaps underlining the fragility of the current bullish sentiment,” the bank said.