Oil prices climbed nearly 7% on Thursday after President Donald Trump said the U.S. would continue attacks on Iran, stoking fears of prolonged disruptions to oil supply.
Brent crude futures LCOc1were up $7.65, or 7.6%, to $108.81 per barrel at 0902 GMT. U.S. West Texas Intermediate crude CLc1 futures were up $7.06, or 7.1%, at $107.18 per barrel.
Both benchmarks were heading for the biggest daily gains, in both absolute and percentage terms, in three weeks, though they remained below highs above $119 a barrel touched earlier in the conflict.
The gains followed losses of more than $1 in both contracts before Trump's televised speech to the nation.
"We're going to hit them extremely hard over the next two to three weeks," Trump said. "We're going to bring them back to the Stone Ages where they belong."
He gave no details on any steps that could lead to a reopening of the Strait of Hormuz.
Markets are reacting to the absence of any "clear mention of ceasefire or diplomatic engagement" in the speech, said Priyanka Sachdeva, senior market analyst at Phillip Nova.
"If tensions intensify or maritime risks increase, oil could test fresh highs as markets price in potential supply disruptions."
Threats to maritime traffic have grown as the conflict intensifies. On Wednesday, an oil tanker leased to QatarEnergy was hit by an Iranian cruise missile in Qatari waters, Qatar's defence ministry said.
Some market participants said they had stopped dealing with cargoes priced off the Dubai Middle East benchmark, normally used to value nearly a fifth of global crude supply, because ports inside the Strait of Hormuz cannot be used.
The head of the International Energy Agency also warned that supply disruptions would start to affect Europe's economy in April, after the region had previously been shielded by cargoes contracted before the start of the war.
"The next critical signal for markets lies in Iran’s response and that of the international community, whether President Trump’s pressure will yield action to secure the Strait, which has not yet materialized," Rystad said in a note.
(Reuters - Additional reporting by Colleen Howe and Sudarshan Varadhan. Editing by Stephen Coates and Mark Potter)