The drone strike on a base in Jordan -- which came days after Yemen's Huthi group struck a vessel in the Red Sea -- ramped up tensions in the region and stoked worries about supplies through the key trade waterway.
Both main crude contracts rose more than one percent in early trade -- hitting levels not seen since November -- before paring the gains slightly.
"The news of three US troops being killed by a drone attack, and President Biden saying 'we shall respond', will likely dial up the market's focus on the region," Andrew Ticehurst at Nomura, said.
The development comes as Israel presses on with its war against Hamas, adding to investor concerns about a wider conflagration that brings in Iran and the United States.
Still, the reports did little to dent equity markets in Asia.
There were gains in Hong Kong, Tokyo, Sydney, Seoul, Mumbai, Bangkok, Taipei, Jakarta and Wellington.
Traders welcomed news that China would stop the lending of certain shares for short selling as officials try to put a floor under the country's battered markets.
Willer Chen of Forsyth Barr Asia said that while the move would likely have a limited effect on stabilising equities, it was "a good gesture as market participants had been calling for regulators to step in on this front".
And Homin Lee, at Lombard Odier, told Bloomberg Television: "The very poor sentiment leading to this could potentially open the door for some technical rebound" in Chinese shares.
"We're slightly more cautious because what's really needed is a change in the inflation outlook for the country and the overall sentiment in the private sector."
- Hong Kong delivers Evergrande blow -
Shanghai edged down following news that a Hong Kong court had issued a winding-up order against Chinese developer Evergrande, stoking fresh worries about the property sector and economy.
Evergrande's Hong Kong-listed shares collapsed more than 20 percent on the news before they were suspended.
Still, Redmond Wong, chief China strategist at Saxo Markets, said "the winding-up of Evergrande's Hong Kong listing entity has been widely anticipated and should not impact the general market much".
Monday's decision came amid worries that a huge debt crisis in China's property sector could spill over into the wider economy.
But analysis firm China Beige Book said in a post on X: "For those anxiously reading (China) headlines today... and working themselves into a panic: Evergrande's demise in 2021 didn't lead to a Lehman Moment in China.
"The disintegration of its already dead husk in 2024 won't either."
The order kickstarts a long process that should see Evergrande's offshore assets liquidated and its management replaced, after the company failed to develop a working restructuring plan.
Traders were also awaiting a crucial policy decision by the US Federal Reserve this week and the release of more corporate earnings.
While the Fed meeting is not expected to see any move on interest rates, traders hope to hear some guidance from officials on their plans, with a cut in March currently seen as a toss-up.
The mostly upbeat day followed another record close for the Dow on Wall Street that came after the central bank's preferred inflation gauge indicated prices were being brought under control.
As well as the Fed's meeting, the week also sees a number of other notable events, including the release of figures on US jobs creation and consumer sentiment, and Chinese manufacturing activity.
Amazon, Microsoft and other large technology companies are also due to report their earnings.
In Europe, London opened higher while Paris and Frankfurt were down.
- Key figures around 0810 GMT -
West Texas Intermediate: UP 0.4 percent at $78.34 per barrel
Brent North Sea Crude: UP 0.4 percent at $83.30 per barrel
Tokyo - Nikkei 225: UP 0.8 percent at 36,026.94 (close)
Hong Kong - Hang Seng Index: UP 0.8 percent at 16,077.24 (close)
Shanghai - Composite: DOWN 0.9 percent at 2,883.36 (close)
London - FTSE 100: UP 0.2 percent at 7,648.37
Dollar/yen: DOWN at 147.83 yen from 148.13 yen on Friday
Euro/dollar: DOWN at $1.0840 from $1.0858
Pound/dollar: UP at $1.2711 from $1.2703
Euro/pound: DOWN at 85.28 pence from 85.44 pence
New York - Dow: UP 0.2 percent at 38,109.43 (close)
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