Brent crude jumped 1.75% in early Monday trading to $104.25 a barrel, its highest level since before the 2008 financial crisis.
European energy companies are evacuating some staff from the country, which is a major oil and gas producer for the European market.
Meanwhile shares in Italian oil firm ENI - which is active in Libya - have fallen 4.4%.
The Italian company had said on Saturday that its operations were unaffected by the violence, which at that point had yet to spread to Tripoli.
Italy buys about one-third of Libya's oil and gas exports, making it the country's biggest customer by far.
ENI has been buying gas from Libya for decades, and is at the centre of a close political relationship between the two countries, according to one analyst.
In 2008-09, the Libyan government had considered buying an up-to-10% stake in ENI, although the investment did not go ahead.
Some 13% of the company's revenues come from Libya, and 30% from North Africa as a whole, meaning the firm is highly exposed to instability in the region.
Although market concern about the firm is focusing on the short-term impact of the unrest, the analyst said there were also fears that a change in regime could lead to the Libyan assets of ENI and other foreign investors being expropriated.
ENI was not yet commenting on the situation in Libya at the time of writing.
Commodities markets are worried about more than just Libya, with the threat of unrest escalating in Iran - the second biggest oil producer in the Organisation of Petroleum Exporting Countries (Opec).
There is nervousness that even Opec's biggest producer, Saudi Arabia, may yet succumb to instability, although the autocratic regime there has yet to witness any protests.
Oil supplies in Libya and elsewhere have yet to be significantly disrupted by any of the events in the Middle East.
However, the head of the Al-Suwayya tribe in eastern Libya is reported to have said they will attempt to stop oil exports to Europe if oppression of protesters by the Gaddafi regime continues.
Strikes by workers have already shut down the Nafoora oilfield, which is operated by a subsidiary of the Libyan state-owned oil company, and protests have also closed the Rus Lanuf oil refinery, according to local news sources.
Libya is responsible for only 2% of all oil production worldwide, although its share of the European market is estimated at 10%.
Oil production is essential to the Libyan economy, with oil output accounting for 95% of export receipts and 25% of the country's economic output.