Benchmark crude for August delivery rose to around 102 US dollars a barrel on the New York Mercantile Exchange, the highest level since May last year after a rise of more than two dollars a barrel overnight.
Stock market investors were also spooked by disappointing data from the Chinese non-manufacturing sector and growing concerns over the future of Portugal's coalition government as it attempts to pursue the austerity measures demanded by creditors.
The FTSE 100 Index was down 1.6% or 100 points, having recovered in recent days from the sell-off triggered by credit crunch fears in China and the prospect of a tapering of economic stimulus measures in the United States.
Michael Hewson, senior market analyst at CMC Markets, said: "When talk of military intervention in Egypt is added to the mix, as well as the spectre of a resumption of political uncertainty in Europe, then you have the perfect recipe for Europe's markets to open lower."
His vow not to resign came hours before a deadline to yield to the demands of millions of protesters or see the military install a new leadership.
Egypt is not an oil producer but its control of the Suez canal, one of the world's busiest shipping lanes, gives it a crucial role in global energy supplies.