Oil prices on Monday spiked to their highest levels since 2008 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 fueled 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 percent, at $124.71 per barrel, and WTI up $6.67, or 5.8 percent, 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.

How high will prices go?

Analysts at Bank of America said if most of Russia's oil exports are cut off, there could be a 5 million barrels 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 percent of global supply. 

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

Meanwhile, talks to revive Iran's 2015 nuclear deal with world powers were mired in uncertainty on Sunday.

"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 think tank Energy Aspects.

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, Reuters reported, citing analysts. 

(With input from Reuters)