Oil prices plunged more than $2 to below $81 a barrel yesterday, extending big losses on expectations that disruption to air travel from the Icelandic volcano will lower demand for jet fuel and uncertainty about whether it would hamper the global economic recovery.

By early afternoon in Europe, benchmark crude for May delivery was down $2.33 to $80.91 a barrel in electronic trading on the New York Mercantile Exchange.

A huge cloud of volcanic ash has shut down air traffic in most of Europe for four days – stranding passengers and scuttling travel plans and freight services that could end up costing billions of dollars.

At the very least, traders say the volcano crisis will lower demand from airlines for jet fuel.

“The market had underestimated the impact of the volcano,” said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. “There’s still a lot of uncertainty about how much this will affect the overall economy.”

Oil fell $2.27 to settle at $83.24 a barrel on Friday after the Securities and Exchange Commission said Goldman Sachs & Co. defrauded investors by failing to disclose key information about mortgage investments it sold as the housing market was collapsing in 2008.