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. Last Updated: 07/27/2016

Oil Falls on Mideast Outlook

LONDON -- Oil fell back from record prices and gold dropped from its highest level in almost two months Monday on reports Israel might soon end its Lebanon offensive, although the government quickly said it had no intention of halting operations against Hezbollah guerrillas yet.

Market volatility was whipped up as Israel's Channel 10 television quoted a senior military officer as saying Israel could wrap up its offensive within days but also that it could escalate its assault by destroying Lebanon's electricity grid.

Israeli government spokesman Miri Eisin responded, saying: "We have no intention of stopping as of yet."

The dollar and government bonds stayed at monthly highs but shares failed to rally on the varying reports, on a day when Israeli airstrikes killed a further 23 people in Lebanon.

Brent crude futures hit record highs of $78.18 per barrel, but fell back to $76.90.

"Eighty is on everybody's lips at the moment," one London-based trader said. "We're still in an up trend and it looks like we'll be in it for some considerable time."

The same could be said for Gold, which hit a two-month high of $674 per ounce on heavy demand, but then dropped to $667.

The dollar rose to monthly highs against the euro and yen as cautious investors shifted into dollar-denominated assets such as gold, oil and U.S. Treasury bonds.