After Russian-backed rebels in eastern Ukraine alleged Kyiv government forces of shelling their territory with mortars on Thursday, oil regained part of its more than 2% loss in Asian trade.
At 0422 GMT, US West Texas Intermediate (WTI) crude was down 0.7 percent at $92.98 per barrel, after plunging more than 2% earlier.
Brent crude was down 0.6 percent at $94.2 a barrel at 0420 GMT, after falling more than 2% earlier.
According to Russian-backed rebels in eastern Ukraine, Kyiv government forces fired mortars to strike their territory on Thursday, in breach of cease-fire accords.
An escalation in the fight with Donbass separatists, which has raged for years, could exacerbate tensions between Russia and the West.
Russia has amassed around 100,000 troops on Ukraine’s border, and the West has warned Moscow with further penalties if it strikes the country.
Oil fell earlier in the day after France and Iran claimed they were getting closer to a compromise to save Iran’s 2015 nuclear deal with international powers, which helped to defuse tensions over Ukraine.
South Korea, which was historically one of Tehran’s most important Asian oil customers, said on Wednesday that it has held working-level talks with Iran about resuming crude oil imports and unfreezing Iranian money.
France said on Wednesday that a decision on whether or not to save Iran’s 2015 nuclear deal with global powers was just fast approaching, and that the political decision was now up to Tehran, while Tehran urged Western nations to be pragmatic.
Russia’s menacing posture toward Ukraine has dominated oil markets in recent weeks, with fears that supply disruptions from the world’s largest producer might send oil prices near $100 a barrel in a tight global market.
Russia’s announcement of a partial troop withdrawal from Ukraine earlier this week was met with warnings from Western nations that Russia was beefing up its military position along the Ukrainian border, keeping tensions high.
The dollar rose in Asia on Thursday after a Russian press release of mortar shells in eastern Ukraine had investors fleeing for cover, fearful of a larger conflict.