Brent crude futures rose over 3.2% on Tuesday.
Prices reached $107.55 a barrel after President Trump rejected Iran’s latest peace proposal.
The dismissal dampens hopes for reopening the Strait of Hormuz, which carries 20% of global oil supply.
OPEC oil output fell to its lowest level in over 20 years this April.
Analysts are reintroducing a risk premium into prices due to the diplomatic stalemate.
The impasse raises concerns regarding sustained energy costs and global inflationary pressures.