Brent crude futures fell $3.68, or 3.2%, to $109.75 per barrel by 4:07 a.m. GMT on Monday, according to Reuters.
U.S. West Texas Intermediate crude dropped $3.43, or 3.3%, to $100.69 per barrel.
The decline followed a third consecutive day of talks between Iranian and Qatari officials aimed at advancing a potential agreement to end the conflict.
Oil traders were also encouraged by the absence of a major military escalation over the weekend, reducing some of the immediate risk premium built into crude prices.
Iranian negotiators were reported to be in Qatar discussing a proposal that could reopen the Strait of Hormuz within two days if the United States meets several conditions.
The waterway remains critical to global energy supplies, and disruption to shipping has helped keep crude prices elevated.
Despite Monday's decline, uncertainty remains high. The United States has warned regional allies about the possibility of renewed military operations after the November 3 midterm elections, while no comprehensive peace agreement has been announced.
OPEC+ producers also agreed to maintain their existing required production levels for December, limiting expectations for a major near-term increase in supply.
For financial markets, falling oil prices could provide relief by reducing inflation concerns and easing pressure on the Federal Reserve. High-growth technology stocks have been particularly sensitive to fears that expensive energy will keep interest rates elevated.
The bottom line: Oil is falling because investors see a better chance of diplomatic progress, not because the Middle East conflict has been resolved. A credible agreement that restores stable shipping through the Strait of Hormuz could push prices lower, while renewed fighting could quickly reverse Monday's decline.
Sources: Reuters, Associated Press and The Wall Street Journal.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Oil prices may change rapidly.