(Bloomberg) – bp Plc and Abu Dhabi National Oil Co. (ADNOC) are facing increasing uncertainty in their $2 billion quest to take natural gas producer NewMed Energy private amid an escalating conflict between Israel and Hamas militants.

Executives at bp and ADNOC, already weighing whether to improve their initial proposal for the Israeli natural gas producer, are anticipating further delays on the deal until the political situation improves, according to people familiar with the matter, who requested anonymity as the matter is private.

The conflict is the latest issue facing the landmark Middle Eastern deal that’s caught the attention of a cadre of hedge funds including Davidson Kempner Capital Management, which recently boosted its stake in NewMed to about 5%.

The approach for NewMed in March highlighted burgeoning financial ties between the United Arab Emirates and Israel since the normalization of ties. At the time, the countries said the political deal would lead to billions of dollars of investment in Israel.

bp and ADNOC remain committed to a deal for now, though a surge in civilian casualties could make it politically unpalatable for the Emiratis to proceed, some of the people said. bp reaffirmed its commitment as part of a strategy update delivered to investors on Tuesday, according to two people who attended the event.

Terms of the deal remain a sticking point. An independent committee evaluating bp and ADNOC’s proposal had already asked them to substantially increase the offer, Bloomberg News reported earlier this month. Any near-term agreement is also complicated by fluctuations in the shekel and crude prices, people with knowledge of the matter said.

Representatives for Adnoc, BP and NewMed declined to comment.

Shares in NewMed have dropped 12% since the conflict began, outpacing a decline in Israel’s benchmark index. The firm owns a 45% stake in Leviathan, the country’s biggest natural gas field, and 30% of Aphrodite, located off Cyprus.

Israel on Monday ordered Chevron Corp. to shut Tamar, the nation’s second-biggest natural gas field, on safety concerns. Reserves in the eastern Mediterranean had already taken on added importance since Russia’s invasion of Ukraine as European states sought to replace piped supplies from Moscow.

If the deal succeeds, it would mark one of ADNOCs first major global acquisitions of a natural gas- or oil-producing asset. The UAE’s state energy producer last year said it would spend billions of dollars expanding its foreign gas, chemicals and clean-energy operations.