Oil prices fell by 7% on Monday after US President Donald Trump said he would postpone any military strikes against Iranian power plants for five days after constructive talks, hours ahead of a deadline that threatened further escalation in the conflict now in its fourth week.

Brent crude futures were down 9.72% at $101.28 a barrel at 1254 GMT after sliding as much as 14.5% to a session low of $96. US West Texas Intermediate was down almost 8.9% at $89.49 after losing 14.2% to a session low of $84.37. 

Prices gradually pared some losses after the steep initial slide after Iran's Tasnim news agency reported that no talks were under way between the US and Iran.

The US President had warned on Saturday that Iranian power plants would be destroyed if Tehran failed to "fully open" the Strait of Hormuz to all shipping within 48 hours, setting a deadline of around 7:44 pm EDT (2344 GMT) on Monday. 

His comments sparked threats of retaliation from Iran's Revolutionary Guards, which said they would attack Israel's power plants and those supplying US bases across the Gulf region if Trump followed through with his threat to "obliterate" Iran's power network.

The war has damaged major energy facilities in the Gulf and nearly halted shipping through the Strait of Hormuz, which handles about 20% of global oil and liquefied natural gas flows.

Analysts have estimated a loss of 7-million to 10-million barrels per day of Middle East oil production.

The crisis in the Middle East is worse than the two oil shocks of the 1970s put together, Fatih Birol, executive director of the International Energy Agency, said on Monday. 

"Oil sentiment may lurch on threats and rhetoric in the near term, but its more durable direction will continue to be shaped by the state of Middle East oil flows," said Vandana Hari, founder of oil market analysis provider Vanda Insights.

Iraq has declared force majeure on all oilfields developed by foreign oil companies, three energy officials said, while oil production at Basra Oil Company has been cut to 900 000 bpd from 3.3-million bpd, Iraqi Oil Minister Hayan Abdel-Ghani said in a ministry statement. 

The supply crunch has led to a temporary waiving of US sanctions on Russian and Iranian oil already at sea. Indian refiners plan to resume buying Iranian oil while refiners elsewhere in Asia are examining such a move, traders told Reuters. 

Meanwhile, Russia's Baltic Sea port of Ust-Luga resumed oil loadings after a drone attack alert was lifted, industry sources said, while neighbouring Primorsk remained shut after air strikes, adding to global shortages.

Libya's El Feel oilfield has been in shutdown since Thursday after state oil company National Oil Corporation (NOC) used its pipeline to transport crude from the Sharara field after its pipeline was damaged by fire, two El Feel engineers said.

Production is expected to resume in a week to 10 days, one of the engineers said.