Crude oil prices fell sharply Monday after U.S. Secretary of State Marco Rubio said President Donald Trump prefers not to use military force against Iran and would like to resolve the conflict diplomatically.
Brent crude futures, the international benchmark, fell 6.4% to $106.20 a barrel as of 9:50 a.m. ET. U.S. West Texas Intermediate declined 6.5% to $97.35 per barrel.
Trump has previously said that he will not attack Iran before the U.S. midterms. But the oil market had priced in the risk of a major military escalation after the elections.
The president "hasn't made a decision," Rubio told reporters over the weekend.
"What the president expresses to you is incredible confidence that if we needed to do something militarily, we would have the ability to do it, and we really we have everything we need to be successful," the secretary of state said. "But we would prefer to do it peacefully."
Iran's Foreign Minister Abbas Araghchi said an agreement with the U.S. is possible if Washington "demonstrates goodwill" and is "truly seeking a peaceful solution," according to the state-owned Islamic Republic News Agency.
Araghchi said mediators are discussing the proposal Iran made during the United Nations General Assembly in September. Tehran expects the U.S. to lift sanctions, reduce its military presence in the region to previous levels and lift the blockade, the foreign minister said.
Iranian Supreme Leader Mojtaba Khamenei on Saturday called for Tehran's armed forces to meet "any level or type of threat" with "an immediate, impactful, and geographically unrestricted response."
Concerns over the Middle East and Ukraine conflicts will likely linger in the near term.
"Attacks on ships and refineries in the Middle East and on civilians in Ukraine continue, doing little to inspire confidence in the prospects for lasting ceasefires in the foreseeable future," said Tamas Varga, analyst at PVM Oil Associates.
"Nonetheless, hope springs eternal," Varga added.
—CNBC's Lim Hui Jie contributed to this report.