Oil prices rallied on Wednesday after Russian President Vladimir Putin said his country was calling up its army reserves in a “partial mobilisation” before referendums in occupied regions in Ukraine.
He vowed that Russia would use “all means at its disposal” if Russia's territorial integrity was threatened.
“This is not a bluff,” Mr Putin said.
Brent, the benchmark for two thirds of the world’s oil, was 1.91 per cent higher trading at $92.35 a barrel at 4.05pm UAE time on Wednesday. It had jumped more than 3 per cent following the announcement.
West Texas Intermediate, the gauge that tracks US crude, had also climbed more than 3 per cent earlier in the day and was up 2.05 per cent to $85.66 a barrel.
Both benchmarks had posted their third consecutive weekly decline last Friday due to mounting concerns about a global recession and China maintaining its restrictive Covid-19 policies that could hit fuel demand in addition to an expected increase in interest rates this week.
The US dollar, already strong, jumped to a 20-year high following Mr Putin's announcement, putting pressure on major currencies.
The euro fell back to below parity and was trading at $0.9903 to the greenback at 11.49am, while Britain's pound dropped to $1.13.
Europe's Stoxx 600 index was up 0.12 per cent at 12.25pm, France's Cac 40 was down 0.34 per cent, Germany's Dax was 0.42 per cent weaker.
On Wednesday, the US Federal Reserve is expect to announce an interest-rate increase at the end of a two-day meeting.
The US central bank is expected to is expected to raise interest rates by at least 75 basis points after three-quarters of a percentage point increases in both July and June.
Some analysts believe the Fed could be more hawkish and increase rates by a full percentage point in an effort to combat four-decade high inflation.
US consumer prices rose by 8.3 per cent in August, exceeding economists' expectations of 8.1 per cent and above the Fed’s 2 per cent target.
“Opec+ may have a strong case to lower output after this week’s central bank decisions,” said Edward Moya, a senior market analyst at Oanda.
“A global economic slowdown is here and unless the oil market sees some surprise disruptions or broader market rally, crude prices could remain heavy.”
In response to a slowing global economy, the 23-member alliance of Opec+ producers agreed earlier this month to cut their October output by 100,000 barrels per day, reverting to August production levels to support prices.
The group convenes again on October 5 to review and decide future output levels, but it could hold an emergency meeting if market dynamics change and require it to intervene.
Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman has said the group would “be attentive, pre-emptive and proactive in terms of supporting the stability and the efficient functioning of the market”.
Higher energy prices and soaring inflation have exacerbated fears of a recession and prompted the World Bank and International Monetary Fund to cut their growth projections for this year.
In July, the IMF lowered its growth forecast for the global economy to 3.2 per cent this year, from its previous projection of 3.6 per cent.