Oil prices fell 4% on Monday as U.S. President Donald Trump said over the weekend Iran was "seriously talking" with Washington, signalling de-escalation with an OPEC member after risks of a military strike drove prices to multi-month highs.

Oil prices slid as investors dial back fears of a supply shock after Donald Trump said Iran was "seriously talking" with Washington over the weekend.

"The markets are pricing the risk that this time the past will not indicate the future—that we could have a sustained disruption in energy flows."

Trump earlier said Iran - which is due to begin a live-fire naval exercise in a key shipping route - was in "serious discussions".