Oil prices plunged more than 2% on Monday on signs of progress in talks between the U.S. and Iran, while investors remained concerned about the economic hit from tariffs that could curb fuel demand.

Brent crude futures fell $1.70, or 2.5%, to $66.26 a barrel, after closing up 3.2% on Thursday. Thursday was the last settlement day of the week due to the Good Friday holiday.

U.S. West Texas Intermediate crude futures fell $1.60, or 2.5%, to $63.08 a barrel, after closing up 3.54% in the previous session.

"The U.S.-Iran talks seem relatively positive, which allows people to start thinking about a possible solution," said Harry Tchilinguirian, head of research at Onyx Capital Group.

"The immediate implication is that Iranian crude is not going to be off the market."

Market liquidity was also lower because of the Easter holiday, which could worsen price movements, he added.

In the talks, the United States and Iran agreed to begin working on a framework for a potential nuclear deal, Iran's foreign minister said, after discussions that a U.S. official described as making "very good progress."

The progress followed further sanctions by the United States last week on an independent Chinese oil refinery suspected of processing Iranian crude, increasing pressure on Tehran.

Markets also came under pressure on Monday after U.S. President Donald Trump repeated criticism of the Federal Reserve. The U.S. economy could slow unless interest rates are lowered soon, Trump said on Monday.

Gold prices rose to another record, with jitters gripping energy markets on concerns about demand, analysts said.

Wall Street's major indexes each fell more than 1%. [.N]

"The risk-off feeling in the market in stocks is pushing us down today," said Phil Flynn, senior analyst at Price Futures Group.

Meanwhile, OPEC+, a group of major producers including the Organization of the Petroleum Exporting Countries and allies such as Russia, is still expected to increase output by 411,000 barrels per day starting in May.

However, some of that increase could be offset by cuts from countries that have exceeded their quotas.

A Reuters poll on April 17 showed investors believe the tariffs will trigger a significant slowdown in the U.S. economy this year and next, with the median probability of a recession in the next 12 months approaching 50%. The U.S. is the world's largest oil consumer.

Investors are eyeing several U.S. data releases this week, including April's manufacturing and services PMIs, for clues on where the economy is headed. (Newsmaker23)

Source: Investing.com