Brent oil futures were up to $64.50 a barrel by 11.08am BST, having gone as high as $65.31 a barrel during early trading hours on Monday. West Texas Intermediate crude futures were at $57.87 a barrel at the time of writing. Oil prices extended gains seen last week, which spiked after Iran shot down a US drone in the Strait of Hormuz on Thursday. Tehran claimed the drone was over its territory, while the US said the incident happened in international airspace.
Reports out of Iran said a US “spy” drone had been downed by Revolutionary Guards.
The drone downing saw Brent surge by 5.0 percent last week, its first weekly gain in five weeks.
WTI jumped around 10 percent, its biggest weekly increase since December 2016.
US Secretary of State Mike Pompeo warned said “significant” sanctions on Iran would be announced on Monday in retaliation to the incident.
It comes after US President Donald Trump called off a military strike, saying he was not seeking war with Iran.
Meanwhile, global supply may remain tight as OPEC and its allies including Russia appear likely to extend their oil cut pact at their meeting July 1-2 in Vienna, according to analysts.
US investment bank Jefferies said in a note to clients: “An extension of OPEC+ production cuts through the end of the year seems highly likely given recent price action.
“The market expects an extension though, and any failure could see oil price gap down.
“The probabilities favor restraint however.”
Russian Energy Minister Alexander Novak on Monday said international cooperation on crude production had helped stabilise oil markets and is more important than ever.
Mr Novak said: “There is a good example of successful cooperation in balancing the oil market between the OPEC countries and non-OPEC.
“Thanks to joint efforts, we today see a stabilisation of world oil markets.”
Boosting oil demand, prospects of a near-term interest rate cut by the Federal Reserve aimed at bolstering the US economy have weakened the dollar.
Oil is usually priced in dollars, and a slide in the value of the weaker greenback makes it cheaper for holders of other currencies.