July 9 (Reuters) - Goldman Sachs said the latest attacks in the Strait of Hormuz could slow the pace of increased oil production in the Middle East, while the cancellation of U.S. sanctions waivers could renew pressure on Iranian oil exports, which have only recently begun to recover.

Oil prices continued their gains on Thursday after the latest wave of tit-for-tat attacks between the United States and Iran dashed hopes of a full reopening of the Strait of Hormuz.

Brent crude futures rose 1% to $78.88 a barrel by 0421 GMT, while U.S. West Texas Intermediate crude futures climbed by roughly the same percentage to $74.34. Both benchmarks closed nearly 5% higher on Wednesday, after earlier hitting their highest levels in more than two weeks.

US President Donald Trump said the interim agreement signed last month to end the trade war with Iran is "over," and this week reimposed sanctions on Iranian oil exports.

The bank said in a note released Wednesday that it sees both upside and downside risks to oil flows from the Gulf and prices in the near term.

He indicated that he still expects oil flows through the Gulf to return to normal levels by the end of July if negotiations continue for 60 days, the waiver for Iranian oil is reinstated, and shipping companies receive sufficient security guarantees. This scenario requires an increase in flows through the Strait of Hormuz of approximately 6.6 million barrels per day.

The bank said, "Although this is not the baseline scenario in our forecasts, the failure of negotiations and the escalation of attacks on oil tankers, along with the possibility of the United States imposing a blockade on Iranian oil, could lead to a further decline in oil flows from the Persian Gulf."

He added that oil exports from the Gulf are currently at 71 percent of their normal levels following recent attacks on oil tankers, down from 83 percent of pre-war levels recorded during the first 10 days after the reopening of the Strait of Hormuz in June.

At the same time, the bank also noted that the escalation of attacks on Russian refineries amid declining product inventories and slowing operating rates in the Middle East and Asia reinforces its expectation that refined product profit margins will continue to rise for a longer period.