Shell PLC (LSE:SHEL, NYSE:SHEL) and BP PLC (LSE:BP.) shares rose 0.9% and 0.5% after crude oil prices surged to their highest levels since the US and Israel opened war on Iran.
Brent crude front-month futures soared from $110 on Wednesday to above $126 a barrel in the early hours of Thursday, before easing slightly to $122.
This followed reports suggesting the US was planning to extend the blockade on Iran and was considering an escalation in the conflict.
Overnight, Axios reported that President Trump is set to receive a new briefing today on potential plans for further military action, where a "short and powerful" wave of strikes would aim to break the negotiating deadlock.
Trump posted yesterday that “Iran can’t get their act together. They don’t know how to sign a non-nuclear deal. They better get smart soon!”
The ongoing closure of the Strait of Hormuz and potential escalation have fed growing fears about an extended stagflationary shock, said macro analysts at Deutsche Bank.
"The market impact of that is already clear, particularly for sovereign bonds," they added, with UK gilt yields hitting a post-2008 high of 5.07% and Germany's bunds rising to a post-2011 high of 3.11%.
In addition, investors are pricing in a more protracted conflict as well, the analysts said, as longer-dated oil futures have moved up to their highest levels of the conflict so far.
The six-month Brent future is at $91.49 a barrel this morning, having not previously closed above $90 in the conflict.