Worrying that tensions in the Middle East could cut off one of the world's most important energy supply routes, traders sent the price of Brent crude, the international standard, soaring 3.6% to 68.75 dollars per barrel.
It came after the US targeted General Qassem Soleimani, the head of Iran's elite Quds Force, killing him and several others.
US President Donald Trump said that Gen Soleimani was "plotting to kill many more" Americans.
"One would hope the fuse that was ignited by the US's action in Iraq can quickly be defused, but to many in the Middle East this may be deemed a declaration of war and a rise in oil prices which remains prolonged is just what the global economy needs to avoid at this time where growth is fragile," said Helal Miah, an analyst at the Share Centre.
Around one fifth of the world's oil supply passes through the Strait of Hormuz, a narrow choke point between Iran and the Arabian Peninsula.
It is a vital point for international energy markets, and markets can react to even the slightest escalation in the region.
Luke Bosdet, the AA's fuel price spokesman, said that drivers could pay more at the pumps if the oil price increase is here to stay.
"As seen in May, oil sustained at above 70 dollars a barrel has the potential to push the price of petrol to around the 130p-a-litre mark," he said.
Last year tensions ratcheted up in the region after a series of attacks on international oil tankers, which Iran's enemies blamed on the Islamic Republic.
The country reacted after Mr Trump ripped up a 2015 agreement on nuclear proliferation between Iran and several western governments.
However, the biggest reaction came in September, when a series of drone strikes hit Saudi oil sites, knocking out half of the country's production.
The 5% reduction in global supply, which analysts predicted, caused oil prices to spike by around a fifth as markets opened.
The US, Britain and Saudi Arabia all blamed Iran for the attacks.