Brent crude futures fell US$4.71, or 4.55%, to US$98.83 a barrel by 2234 GMT, while US West Texas Intermediate was at US$92.03 a barrel, down $4.57, or 4.73%.

Both contracts touched their lowest since May 7 earlier in the session.

On Saturday, US president Donald Trump said that Washington and Iran had “largely negotiated” a memorandum of understanding on a peace deal that would reopen the Strait of Hormuz, which before the conflict carried one-fifth of global oil and liquefied natural gas shipments.

However, the two sides remain at odds on several difficult issues, with Trump saying on Sunday he had told his representatives not to rush into any deal with Iran.

MST Marquee analyst ​Saul Kavonic said: “Notwithstanding all the caveats and risks that remain to the peace deal and Strait of Hormuz, there is now some light at the end of the tunnel, which will bring some near-term oil price relief.”

However, analysts expect that it will take months for oil flows through the strait to return to normal and for damaged oil and gas facilities to be repaired.