While remaining below Monday's peak of $139.13 per barrel, the main international oil contract, Brent, jumped 6.8% to $131.63.
The main U.S. contract, WTI, rose by 6.7% to $127.44 per barrel.
President Joe Biden announced a ban on U.S. imports of Russian oil, while Britain said it will phase them out by the end of the year.
EU nations, which receive roughly 40% of their gas imports and one quarter of their oil from Russia, instead opted to set a goal of cutting their Russian gas imports by two-thirds.
Meanwhile, Moscow warned earlier that in retaliation for sanctions imposed on it for the invasion, it could cut off natural gas supplies to Europe via the Nord Stream 1 pipeline.
While the U.S. does not import large amounts of Russian oil, analysts said the move was nevertheless important.
Market analyst Fawad Razaqzada at ThinkMarkets called it the "launch of an an all-out economic war against Russia" by the United States.
"There will be consequences: high gas prices, even more inflation and retaliation from Russia."
Craig Erlam at OANDA said: "It's another step towards the West turning its back on Russia and leaving it isolated in the world."
The rise in oil prices pulled the rug out from under a rebound in European and US equity prices.
While London managed to squeak out a gain of 0.1 percent, Frankfurt ended the day flat and Paris shed 0.3 percent.
Meanwhile on Wall Street, the Dow was down 0.6 percent in late morning trading.
Commodity prices also felt the effects of the growing isolation of Russia.
The London Metal Exchange suspended trade in nickel after the base metal spiked to a record $101,365 per tonne as Russian supply concerns sparked sharp volatility.
Nickel is used to make stainless steel and batteries for electric vehicles.
"Russia is one of the leading global exporters of this commodity and with the potential of incoming sanctions directed towards western countries, the market could see a significant supply shock in the short term which could lead to even further price increases until the situation is stabilised," said Walid Koudmani, chief market analyst at xtb online trading platform.
Nickel prices have risen from around $20,000 per tonne in January, he noted, putting huge pressure on manufacturers.
Gold rose as high as $2,069.25, a level unseen since August 2020.
The Ukraine crisis comes just as uncertainty was rising owing to surging prices caused by a spike in demand for oil, tight supplies and pandemic-induced supply chain snarls, among other things.
Markets remain fearful of stagflation -- a vicious mixture of low economic growth and elevated inflation.
"There are fears we are heading for a period of stagflation in the eurozone given the energy crunch and the region's exposure to Russia," noted ThinkMarkets' Razaqzada.
Europe gas reference Dutch TTF fell 6.5 percent to 212.35 euros per megawatt hour on Tuesday, one day after striking a record 345 euros.
Brent North Sea crude: UP 6.8 percent at $131.63 per barrel
West Texas Intermediate: UP 6.7 percent at $127.44
New York - Dow: DOWN 0.6 percent at 32,622.95 points
EURO STOXX 50: DOWN 0.2 percent at 3,505.29
London - FTSE 100: UP 0.1 percent at 6,964.11 (close)
Frankfurt - DAX: FLAT at 12,831.51 (close)
Paris - CAC 40: DOWN 0.3 percent at 5,962.96 (close)
Tokyo - Nikkei 225: DOWN 1.7 percent at 25,790.95 (close)
Hong Kong - Hang Seng Index: DOWN 1.4 percent at 20,765.87 (close)
Shanghai - Composite: DOWN 2.4 percent at 3,293.53 (close)
Euro/dollar: UP at $1.0885 from $1.0854 Monday
Pound/dollar: DOWN at $1.3091 from $1.3104
Euro/pound: UP at 83.11 pence from 82.83 pence
Dollar/yen: UP at 115.71 yen from 115.32 yen