Crude oil prices crossed $49 per barrel on Friday amid heightened concerns that supplies from Iraq may be disrupted because of the turmoil in Najaf.
The sharp rise brought prices close to the psychologically important $50 mark.
On London's International Petroleum Exchange, Brent crude futures for October delivery also soared to a new intra-day record high of $45.15, before falling to $45.06.
Experts have warned that prices could go up to $60 per barrel.
Organization of the Petroleum Exporting Countries, however, has tried to soothe frayed nerves by saying there will be "a significant outcome", from its meeting in September.