STORY: Oil prices extended declines on Wednesday and dropped to two-week lows.
The sell-off came after a Pakistani source said the U.S. and Iran were close to an initial peace deal.
Brent crude futures fell just over $10, or above 9%, to $99.80 a barrel by mid-morning in European trading - though later climbed back over the $100 mark.
It was the first time Brent had fallen below $100 since April 22.
U.S. West Texas Intermediate also lost around 6% of its value in early U.S. trade.
Both benchmarks were on track for their biggest daily falls in absolute terms in a month.
U.S. media outlet Axios reported Washington expects Iranian responses on several key points in the next 48 hours on a reported peace agreement.
It cited sources saying this was the closest the parties had come to a deal since the war began.
Iran had said earlier it would only accept a fair and comprehensive agreement.
The U.S. military said on Monday it destroyed a number of Iranian small boats in efforts to help stranded ships to exit the Strait of Hormuz.
Crude oil prices have gone up since February after supply was disrupted when marine traffic through the strait was halted after the war began.
Brent traded at its highest in more than four years last week.
The strait's closure has led to a drawdown in global oil and fuel inventories as refineries try to offset production shortfalls.
Market sources said U.S. crude oil inventories fell for a third week, while gasoline and distillate stocks also dropped.
The sources said crude stocks fell by 8.1 million barrels in the week ended May 1.
