Brent crude fell 1.29% to $93.17 while WTI dropped 1.38% to $85.86 on Monday.
Investors took profits after both benchmarks gained more than 5% last week amid stalled US-Iran peace talks.
New US sanctions could further disrupt Iranian oil supplies as crude offers to China decline and Hormuz tensions persist.
Oil prices fell by more than $1 a barrel on Monday as investors took profits ahead of an expected US announcement on new sanctions against Iran, with markets weighing the potential impact on crude supplies from the Middle East.
Brent crude futures fell $1.22, or 1.29%, to $93.17 a barrel by 0035 GMT, while US West Texas Intermediate crude was down $1.20, or 1.38%, at $85.86. According to Reuters, both contracts recorded their second consecutive weekly gains last week, rising more than 5%, after peace talks between the US and Iran reached a stalemate and shipments through the Strait of Hormuz remained restricted. The waterway has historically carried about a fifth of the world's oil supply.
US Treasury Secretary Scott Bessent tweets, "President Trump has dismantled Iran’s military capabilities, destroyed nearly 100 percent of its military factories, and buried its nuclear program. We are now entering the endgame. At dawn begins an economic D-Day — the single greatest financial offensive ever marshaled against an adversary..."
Earlier, Bessent said, "...those who fear the danger of defying Tehran ought not to discount the cost of testing Washington. The President has created the conditions to leverage every agency, every authority and action many assumed we would never summon. Our objective is to sever every economic lifeline that sustains the tyrannical regime until Tehran stands alone."
US Treasury Secretary Scott Bessent is scheduled to hold a press conference at 2 p.m. EDT (1800 GMT) on Monday. Bessent has threatened to impose "the toughest sanctions in history" on Iran, while President Donald Trump has also threatened sanctions against Iran's trading partners.
"It is unclear whether U.S. policy to economically isolate Iran will prove effective," Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia, wrote in a note.
"But if the U.S. measures do work as intended, Iran's ability to respond via increased violence becomes a growing risk for energy markets to consider."
Iran has condemned the US plans to announce new sanctions, while President Masoud Pezeshkian has called for a diplomatic solution. Reuters reported that offers of Iranian crude to Chinese buyers have declined and prices have risen as a US blockade has cut Tehran's shipments, according to trade sources.
"The more pragmatic members of the Iranian leadership would prefer to de-escalate but the hardliners would probably prefer to fight to the bitter end," IG markets analyst Tony Sycamore said.
"I think by the end of this week we will have a good idea which side of the Iranian leadership has the upper hand."
Meanwhile, Iran has granted permission for a number of Iraqi oil tankers to pass through the Strait of Hormuz following repeated requests from Baghdad, Iran's state news agency IRNA reported on Saturday.
