The price of oil jumped by more than 16 US dollars to over $120 a barrel, marking the biggest one day rise on record.
It was put down to the effect the proposed US government’s financial rescue plan would have on inflation, which caused the dollar to slide.
In addition, Saudi Arabia cut its output.
Traders remain worried about the exact workings of the rescue plan, and what it could mean for the world’s biggest economy.
Retailers, airlines and travel companies saw their share prices tumble.
Last week oil was trading as low as $91 a barrel.