Smoke emanates from smokestacks from an oil refinery in Linden, New Jersey. AFP
Brent North Sea crude jumped more than 10 percent to $119.13 a barrel, while the main US oil contract West Texas Intermediate rose 2.6 percent to $98.81 a barrel.
Iranian missiles have truck the world's largest liquefied natural gas hub in Qatar, while drones hit oil refineries in Saudi Arabia and Kuwait.
Fears over global energy supplies aslo sent European gas prices up more than 30 percent.
US President Donald Trump said Washington "knew nothing" of Israel's attack on South Pars, but vowed "NO MORE ATTACKS WILL BE MADE BY ISRAEL" on the site if Tehran stops attacking Qatar.
But if Iran did not comply, the United States would "massively blow up the entirety of the South Pars Gas Field", Trump warned.
The Iranian strikes on Qatar came as Abu Dhabi shut down operations at a gas facility due to falling debris from missile interceptions.
"We warn you once again that you made a big mistake in attacking the energy infrastructure of the Islamic republic," the Revolutionary Guards said in a statement carried by Iranian media.
"If it is repeated again, further attacks on your energy infrastructure and that of your allies will not stop until it is completely destroyed."
The increased tension also fuelled a sell-off in equities, which had enjoyed a broadly positive start to the week thanks to a fresh rally in tech firms.
Tokyo tanked more than three percent and Seoul more than two percent. Hong Kong, Shanghai, Sydney, Singapore, Taipei, Wellington, Mumbai, Manila and Bangkok were also down.
London, Paris and Frankfurt extended losses at the open.
Markets have been hammered since the start of the war, with Tehran hitting sites across the Gulf and effectively closing the Strait of Hormuz, through which a fifth of global oil and gas flows.
The surge in energy costs has fanned fears of another surge in inflation and raised the possibility of higher interest rates.
Those concerns were compounded Wednesday with data showing US wholesale inflation rose more than expected in February.
Federal Reserve Chair Jerome Powell then said he expected higher energy costs to boost price rises in the near term but added that little was clear at this point.
"We're right at the beginning of this, and we don't know how big -- you just don't know how big this will be and how long it lasts," he said after the bank held interest rates. Officials would have to "wait and see", he said.
The Bank of Japan held rates on Thursday and also warned it saw inflation spiking on the back of the crude surge. That came after the Reserve Bank of Australia hiked its key rate Tuesday, pointing to "sharply higher fuel prices".
Eyes are on decisions later in the day by the European Central Bank and the Bank of England.
- Key figures at around 0815 GMT -
Tokyo - Nikkei 225: DOWN 3.4 percent at 53,372.53 (close)
Hong Kong - Hang Seng Index: DOWN 2.0 percent at 25,500.58 (close)
Shanghai - Composite: DOWN 1.4 percent at 4,006.55 (close)
London - FTSE 100: DOWN 1.0 percent at 10,200.28
Euro/dollar: UP at $1.1455 from $1.1451 on Wednesday
Pound/dollar: UP at $1.3263 from $1.3256
Dollar/yen: DOWN at 159.35 yen from 159.87 yen
Euro/pound: UP at 86.39 pence from 86.38 pence
New York - Dow: DOWN 1.6 percent at 46,225.15 (close)
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