Brent crude futures fell $1.22, or 1.29 per cent, to $93.17 a barrel, while US West Texas Intermediate (WTI) crude declined $1.20, or 1.38 per cent, to $85.86 a barrel.
Both benchmarks had gained more than five per cent last week as stalled peace talks between the United States and Iran and disruptions to oil shipments through the Strait of Hormuz raised concerns over global supplies.
US Treasury Secretary Scott Bessent is expected to announce new sanctions against Iran at a press conference on Monday. He has threatened to impose what he described as the toughest sanctions in history, while US President Donald Trump has also indicated that Iran's trading partners could face sanctions.
Analysts said that if the new US measures succeed in further isolating Iran economically, regional tensions and risks to energy markets could increase.
Iran has condemned the planned US sanctions and called for a diplomatic solution to the ongoing tensions.
Meanwhile, trade sources said US restrictions had led to a decline in offers of Iranian oil to China and an increase in prices. Iran has, however, allowed some Iraqi oil tankers to pass through the Strait of Hormuz following several requests from Baghdad.
Analysts said Iran's response in the coming days, along with details of the new US sanctions, would play a key role in determining the direction of global oil prices.