Brent crude futures fell more than 6% to $89.58 per barrel, while U.S. West Texas Intermediate (WTI) crude futures dropped more than 7% to $82.87 per barrel.

Both contracts were trading at their lowest levels in nearly a week after rising over the previous three weeks.

Brent crude had reached $100 per barrel as the conflict expanded into the Red Sea, disrupting Saudi oil exports to Asia through the Bab el-Mandeb Strait.

U.S. Ambassador to the United Nations Mike Waltz said in comments to Fox News Sunday and other American media outlets that President Donald Trump had decided to temporarily halt the attacks to allow more time for diplomacy.

Market analyst at IG Markets, Tony Sycamore, said: "Hopes are growing that a genuine diplomatic path may be taking shape. Returning to the 14-point memorandum of understanding, with greater clarity over control of the Strait of Hormuz, would be a good starting point."

Despite the halt in attacks, shipping data from Kpler showed that fewer than 10 vessels carrying commodities crossed the Strait of Hormuz daily at the beginning of this week.