Brent crude futures declined by $4.71, or 4.55%, to trade at $98.83 per barrel by 2234 GMT. Meanwhile, US West Texas Intermediate crude fell $4.57, or 4.73%, to $92.03 per barrel.
Both benchmark contracts earlier touched their weakest levels since May 7.
On Saturday, US President Donald Trump said Washington and Iran had “largely negotiated” a memorandum of understanding related to a peace agreement that could eventually reopen the Strait of Hormuz. Before the conflict escalated, the route handled nearly one-fifth of global oil and liquefied natural gas shipments.
However, differences between the two sides continue to persist on several sensitive issues. Trump also said on Sunday that he had instructed his representatives not to rush into finalising any agreement with Iran.
Saul Kavonic said that despite the remaining uncertainties and risks surrounding both the peace deal and the Strait of Hormuz situation, there now appears to be some indication of progress that could offer short-term relief to oil prices.