A rally in oil prices took a break on Tuesday as the market waits for Israel's response to last week's Iranian rocket attacks that triggered a price surge on concerns of a broader conflict in the Middle East.

Both benchmark contracts rose more than 3% on Monday to their highest since late August, adding to last week's rally of 8%, the biggest weekly gain in over a year, on concerns that hostilities could disrupt oil supplies from the Middle East.

Brent crude futures were down $1.62, or 2%, to $79.31 per barrel at 1014 GMT. U.S. West Texas Intermediate futures were down $1.60, or 2.07%, to $75.54 a barrel.

Brent surpassed $80 per barrel for the first time since August on Monday.

Panmure Liberum analyst Ashley Kelty said prices were set to remain volatile but profit taking could pressure the market in the absence of a material shift in activity in the Middle East.

The oil price rally began after Iran launched a missile barrage on Israel on Oct. 1. Israel has sworn to retaliate and is weighing its options, with Iran's oil facilities considered a possible target.

"Oil can keep ascending only for so long purely based on perceptions and not actual supply disruption ... although it would be irresponsible to claim that the dust has settled on Iran's direct and ominous involvement in the conflict, but for now the threats of Israeli assaults on Iranian oil infrastructure have not materialized yet," said Tamas Varga of oil brokerage PVM.

However, some analysts said an attack on Iranian oil infrastructure was unlikely and warned oil prices could face considerable downward pressure if Israel focuses on any other target.

"Oil prices are suffering from a risk-off environment, likely driven by some disappointment on the latest Chinese stimulus measure announcement," said Giovanni Staunovo, an analyst at UBS.

China said on Tuesday it was "fully confident" of achieving its full-year growth target but refrained from introducing stronger fiscal steps, disappointing investors who had banked on more support for the economy.

Investors have been concerned about slow growth dampening fuel demand in China, the world's largest crude importer.

In the U.S., Hurricane Milton intensified into a Category 5 storm on its way to Florida after forcing at least one oil and gas platform in the Gulf of Mexico to shut on Monday.

Traders will also be looking out for the latest U.S. crude oil inventory data, with analysts expecting stocks to rise by 1.9 million barrels in the week ended Oct. 4, according to a preliminary Reuters poll.

The American Petroleum Institute is due to post its tally of U.S. stockpiles at 2030 GMT on Tuesday, followed by the official tally from the Energy Information Administration at 1430 GMT on Wednesday.

(Reporting by Arunima Kumar in London and Emily Chow in Singapore; Editing by David Evans and Mark Potter)