Oil prices rose to their highest level since the start of the war in Iraq.
The prospect of a longer war has sent oil prices higher
Oil shot up on concerns that the war in the Gulf could be much longer than expected and could lead to a serious fuel shortages.
But prices fell back after an official from the oil producers' cartel, Opec, said there was enough crude to supply the world's demands despite stoppages in Iraq and Nigeria.
In London, the price of Brent crude oil rose 92 cents to $27.74 a barrel but later fell back to end down 39 cents at $26.43.
In New York, US-grade oil reached $31.05 a barrel but settled down 21 cents at $30.16.
Oil prices rose on reports from the US army that it would take several months to get Iraq's southern oilfields up and running again.
At the same time clashes between warring tribal factions in Nigeria have halted oil output from Africa's biggest producer.
While oil prices were see-sawing, stock markets on both sides of the Atlantic were, for the most part, heading downwards.
In New York, the Dow Jones index ended down 56 points at 8,146.
Traders said the markets were being driven by major concerns about the progress of the war in Iraq.
"We're shipping in new soldiers in and they're telling us that
was scheduled," said Art Hogan, chief market strategist at Jefferies & Co.
"I think that's the spin they're putting on it."
London's FTSE 100 index closed down 0.6% at 3,708, its lowest level for two weeks. The German Dax was 51 points lower at 2,533 but the French Cac 40 ended up 0.4% at 2,733.