Oil surged after US President Donald Trump rejected Iran's latest response to his proposal to end the war in the Middle East, prolonging the effective closure of the crucial Strait of Hormuz.
Brent crude futures advanced as much as 4.5% to $105.80 a barrel, while West Texas Intermediate traded near $100.
The near-closure of Hormuz since the start of the war at the end of February has choked off supplies of crude, natural gas and fuels to global customers, driving up energy prices and raising inflation fears.
The International Energy Agency says the conflict is causing the biggest supply shock in history.
Fears will likely grow over the potential for re-escalation once again, leaving further upside to prices, said Warren Patterson, head of commodities strategy for ING Groep NV in Singapore.
The market will only normalize in 2027 should shipping through Hormuz remain curtailed for more than a few weeks from now, Saudi Aramco Chief Executive Officer Amin Nasser said on Sunday.
