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Oil prices spiked to their highest levels since 2008 on Monday as the United States and European allies weighed a Russian oil import ban and delays in the potential return of Iranian crude to global markets fuelled supply fears.

In the first few minutes of trade Brent crude reached $139.13 and U.S. West Texas Intermediate (WTI) hit $130.50, both benchmarks striking their highest levels since July 2008.

By 1017 GMT, prices had lost some of those gains, with Brent up $6.60, or 5.6%, at $124.71 per barrel, and WTI up $6.67, or 5.8%, at $122.35.

The United States and European allies are exploring banning imports of Russian oil, U.S. Secretary of State Antony Blinken said on Sunday, and the White House coordinated with key Congressional committees moving forward with their own ban.

Analysts at Bank of America said if most of Russia's oil exports are cut off, there could be a 5 million barrel per day (bpd) or larger shortfall, and that means oil prices could go as high as $200.

JP Morgan analysts said oil could soar to $185 this year, and analysts at Mitsubishi UFJ Financial Group Inc (MUFG) said oil may rise to $180 and cause a global recession.

"If the supply tightness does not ebb, oil may exceed way above its record high," Howie Lee, an economist at Singapore's OCBC bank, said.

"In the worst case scenario of a complete sanction on Russia’s energy exports, I won’t be surprised to see Brent trading above $200," he added.

Russia is the world's top exporter of crude and oil products combined, with exports at around 7 million bpd, or 7% of global supply. Some volumes of Kazakhstan's oil exports from Russian ports have also faced complications.

The head of Japan's largest business lobby said the country's imports of Russian crude could not be replaced immediately. Russia is Japan's fifth-biggest supplier of crude oil and liquefied natural gas (LNG).

Global oil prices have spiked more than 60% since the start of 2022, along with other commodities, raising concerns about world economic growth and stagflation.

China, the world's No. 2 economy, is already targeting slower growth of 5.5% this year.

Meanwhile, talks to revive Iran's 2015 nuclear deal with world powers were mired in uncertainty on Sunday following Russia's demands for a U.S. guarantee that the sanctions it faces over the Ukraine conflict will not hurt its trade with Tehran. China has also raised new demands, according to sources.

In response to Russia's demands, Blinken said on Sunday that the sanctions imposed on Russia over its Ukraine invasion have nothing to do with a potential nuclear deal with Iran.

"Iran was the only real bearish factor hanging over the market but if now the Iranian deal gets delayed, we could get to tank bottoms a lot quicker especially if Russian barrels remain off the market for long," said Amrita Sen, co-founder of Energy Aspects, a think tank.

Iran's top security official said on Monday the outlook for nuclear talks "remains unclear". Iran's foreign ministry spokesman said a deal can be reached quickly if Washington accepts points made by Tehran.

Iran will take several months to restore oil flows even if it reaches a nuclear deal, analysts said.

Separately, U.S. and Venezuelan officials discussed the possibility of easing oil sanctions on Venezuela but made scant progress toward a deal in their first high-level bilateral talks in years, five sources familiar with the matter said, as Washington seeks to separate Russia from one of its key allies.