European benchmark Brent North Sea crude was up more than nine percent to $107.44 -- both levels the highest in more than seven years.
The International Energy Agency (IEA) said member countries had agreed to release 60 million barrels of oil from their emergency reserves to stabilise the market after Russia's invasion of Ukraine.
The announcement came on the eve of a key output meeting of OPEC and non-member producers, including Russia.
"The oil rally has seriously accelerated today, breezing past $100 and gathering momentum along the way," Craig Erlam from OANDA said.
Frankfurt and Paris stock markets accelerated losses to close 3.9 percent down.
London slid 1.7 percent, as investors shrugged off Asian gains. Wall Street followed suit, dropping around two percent in mid morning trades.
"After staging an impressive recovery on Monday to close the weekend gaps, the major indices have started the new month on the back foot once again," Fawad Razaqzada from ThinkMarkets said.
"This is hardly surprising given the Ukraine situation and the impact sanctions on Russia is having on the wider global markets.
"European banks for example have big exposures to Russian lenders."
Bitcoin gained around six percent to $43,467 with strong support for the world's most popular cryptocurrency in Russia, where many investors are seeking shelter from the nation's sanctions-ravaged economy.
Key European stocks indices had also fallen Monday after world powers imposed new sanctions on Russia.
With no let-up in the assault on its neighbour, Russia has been pummelled by a series of widespread and debilitating sanctions.
The measures have sent the ruble crashing to a record low and forced the central bank to more than double interest rates to 20 percent.
The Moscow Stock Exchange remained shut on Tuesday in an attempt by authorities to stave off another widely expected dramatic sell-off.
The crisis has also ramped up fears about supplies of crucial commodities from the region, including wheat and nickel but particularly crude, just as demand surges owing to economic reopenings.
The conflict provides an extra headache for global central banks, who will likely have to recalibrate their plans to tighten monetary policy as they try to support their economies.
In London, Shell's share price dipped 0.7 percent after the energy major announced it would sell its stake in all joint ventures with Gazprom, following Russia's invasion of Ukraine.
The news came after rival energy titan BP also signalled its exit from Russia.
TotalEnergies on Tuesday said that while it would stop providing capital for new projects in Russia, the French giant was not withdrawing from current projects in the country.
Nevertheless, "there has been a mass exodus by Western companies from Russia in recent days as the Kremlin looks increasingly isolated and fragile", said Hargreaves Lansdown analyst Sophie Lund-Yates.
"It is clear that while most pain will be felt by Moscow, these decisions will weigh on European businesses too, which will come through in their next quarterly results," she noted.