NEW YORK (CNNMoney) -- Oil prices jumped more than $2 a barrel in electronic trading Sunday following escalating violence in Libya, where the military called for an immediate cease-fire after allied forces fired on Libyan defense sites.
"It seems like things have stepped up and that means more uncertainty," said Peter Beutel, an oil analyst with Cameron Hanover. "Every incident that you have expands [uncertainty]."
The benchmark U.S. contract, West Texas Intermediate, for April delivery gained $1.95 to $103.02 a barrel. The more active May contract jumped $2.08 to $103.93 a barrel.
That's still comfortably below the $106.95-a-barrel high hit two weeks ago, but Beutel said he expects volatility to rule the day.
"[Volatility] just possibly couldn't get any higher," he said, adding that he wouldn't be surprised to see prices go up by $50 and then drop $100 over the course of the year. "Volatility is getting worse and worse each day."
Meanwhile, brent crude, the main European contract, rose $1.05 to $114.98 a barrel.
While Libya is Africa's third-largest oil producer and sits atop the continent's largest reserves, the country only contributes about 2% of the 87.5 million barrels of oil the world consumes every day.
Earlier this month, the International Energy Agency estimated roughly 1 million barrels per day of Libyan oil had been taken off the world market so far.
Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries have pledged to increase production to make up for any lost oil due to unrest in Libya.
But concerns are less about Libyan production and more about how far the problems will spread.
Traders are worried about growing conflict in the Middle East, following protests in Yemen, Bahrain and Oman.
"It's spreading closer and closer to the Petroleum Gulf," said Beutel, and that's what's fraying investors' nerves.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||4.17%||4.11%|
|15 yr fixed||3.19%||3.16%|
|30 yr refi||4.19%||4.12%|
|15 yr refi||3.21%||3.19%|
Today's featured rates:
Greece says it won't pay the IMF even as it engages in a flurry of last minute activity to revive talks with Europe on a bailout. More
Facebook's "authentic name" policy is stepping on the toes of many minorities. More
Richard Branson picked these three businesses as his favorite in the final of the "Pitch to Rich" competition. More
An estimated 5 million more salaried workers may soon become automatically eligible for overtime pay, thanks to a pending federal rule change. More