The news exacerbated ongoing supply crunch fears, causing the price of Brent crude oil, the international benchmark, to rise 8% to over $116 per barrel, while West Texas Intermediate crude jumped 7.5% to around $112 per barrel. 

EU nations debated whether to join the U.S. in sanctioning Russian oil and natural gas at a series of meetings on Monday, ahead of talks with President Biden set for later this week.

Some representatives, including Irish Foreign Minister Simon Coveney and Danish Foreign Minister Jeppe Kofod, argued the time has come to sanction Russian energy, despite the EU’s reliance on Russian natural gas.

“We have to discuss how we can support Ukraine even further, politically, economically, with humanitarian aid, security-wise, everything is on the table,” Kofod told reporters.

Others, including Russia’s biggest European energy customer, Germany, questioned whether sanctioning Russian energy would be possible. In February, Germany saw a record 25.9% jump in its producer price index, a measure of the change in the price of goods sold by manufacturers, as rising energy prices continued to put pressure on costs.

“The question of an oil embargo is not a question of whether we want or don’t want (it) but a question of how much we depend on oil,” German Foreign Minister Annalena Baerbock said, Reuters reported.

“Germany is importing a lot (of Russian oil) but there are also other member states who can’t stop the oil imports from one day to the other. If we could, we would do it automatically,” she added.

European Commission President Ursula von der Leyen said on March 11 that she would put forward a proposal to end Germany’s reliance on Russian energy by May, but the country faces growing pressure to end its Russian reliance before then.

Russia is the biggest exporter of natural gas and the second largest exporter of oil globally, according to the International Energy Agency. The loss of Russian energy exports since the start of the Ukraine War has already led to the sixth-largest disruption in the supply of oil since World War II, according to strategists at Goldman Sachs Research. 

Declining optimism for peace

Declining optimism for peace between Ukraine and Russia has also put pressure on oil prices. Russian and Ukrainian diplomats met over the weekend to discuss a ceasefire, but hopes of either side laying down their arms quickly faded when Russia called for Ukraine to surrender its port city of Mariupol.

Ukraine’s Deputy Prime Minister, Iryna Vereshchuk, said, according to Reuters: “There can be no question of any surrender, laying down of arms. We have already informed the Russian side about this.” 

Susannah Streeter, senior markets analyst at UK-based asset manager Hargreaves Lansdown, told CNBC that “optimism is seeping away about progress in talks to achieve a ceasefire in Ukraine and that’s sent the price of oil on the march upwards.” 

Analysts at the German commercial bank Commerzbank echoed her sentiments.

“The news from Russia and Ukraine with respect to the peace talks no longer sounded nearly as optimistic as it did before, which has doubtless prompted the market to reassess the situation,” the analysts wrote in a recent report.

A weekend attack by Yemen’s Iran-backed Houthi rebels on Saudi energy facilities that caused a temporary drop in output at a refinery also added to oil market turmoil.

Yehia Sarie, a spokesman for Iran-backed Houthi rebels, told Aljazeera that the group launched “a wide and large military operation into the depth of Saudi Arabia” on Monday. 

The extent of the damage to the Saudi facilities still remains unclear, but Aramco CEO Amin Nasser said during an earnings call that these types of attacks are “a real concern for the world,” adding that “if more escalations happen over time, it might have some impact on supply.”