Oil prices started the week higher after Iran launched ballistic missiles at Israel on Sunday night, heightening fears that U.S.-Iran peace talks might once again fall apart.At the time of writing, Brent crude had climbed 2.51% to $95.43 per barrel, while West Texas Intermediate had gained 2.34% to trade at $92.66 per barrel.Sunday's missile salvo marks the first direct Iranian attack on Israel since a ceasefire between the two countries took effect in April. The strikes came just hours after Israel carried out an airstrike in Beirut targeting what it described as a Hezbollah command center. Iran had warned Israel last week that it would launch missiles against Israel if it targeted Beirut.Israeli authorities reported that all incoming missiles were intercepted and there were no casualties, but the exchange has put oil markets on edge regardless.President Trump attempted to reassure markets that diplomacy remains on track, telling the Financial Times shortly after Iran's attack that the United States "calls the shots" and that Israel's Prime Minister Netanyahu "won't have any choice". The President added that the attacks "will not have any effect" on the deal.Over the last several weeks, the continued push for a diplomatic breakthrough has provided markets with some much-needed optimism that the Strait of Hormuz may soon reopen, but signs of tightness in physical oil markets are becoming clearer by the day. The key question now is whether Iran's attack on Israel represents a temporary setback for negotiations or the beginning of a broader collapse in ceasefire efforts. Talking to Fox News, Trump said he planned to call Netanyahu and urge Israel not to retaliate, saying, "Each of them had their fun. Israel had its strike, and Iran had its strike. We don't need another one".The clock continues to tick on an oil market that is quickly running out of options to replace or recover the barrels lost through the Strait of Hormuz closure. A failure to achieve a diplomatic breakthrough will likely send prices soaring, but for now, it appears traders remain hopeful that a deal can be reached.By Josh Owens for Oilprice.comMore Top Reads From Oilprice.comEU Says No Jet Fuel Shortage Coming Despite Middle East Supply LossUK Conservatives Blast Labour North Sea Ban as 'Utter Madness'Australia's 344-Million-Barrel Oilfield Could Finally Get the Green Light