But critics warn that investors are seeking good news when there isn't any: File Image/Pixabay.

Sentiment was largely responsible for a massive 8 percent plummet in oil prices on Monday, as analysts seemingly desperate for any sign of a reduction in hostilities between the U.S. and Iran regarded a mutual halting of fire over the weekend as a possibility that peace negotiations could be resurrected.

After U.S. president Donald Trump told reporters that Washington was talking with Tehran “right now,” Brent dropped more than 8 percent to below $88 per barrel at 17:57 GMT, while West Texas Intermediate fell more than 7 percent to around $82 per barrel.

Mike Waltz, U.S. ambassador to the United Nations, fortified the perception that diplomacy was still on the table by telling media, “What the president is doing right now, as we’ve seen all along, is giving some talks some space.”

All but ignored was the remark by Iranian foreign ministry spokesman Esmaeil Baghaei that Tehran would “never allow America to determine the timing of war and peace” and would “continue to defend ourselves for as long as our interests and considerations require.”

Baghaei added that the Strait of Hormuz remained “closed”; for the record, just 29 transits were recorded from Friday to Sunday, according to MarineTraffic data; traffic along Bab el Mandeb in the Red Sea, which Iran-backed Houthis vowed to block, saw 100 crossings over the same time period.

John Evans, analyst at PVM, said in reaction to Monday’s oil price losses, “The market seems to be forever seeking good news from an arena that really is not providing any…… Prices will only continue lower if high prices once again dent demand, not questionable mini ceasefires.”

ANZ analysts wrote in a note, "For the moment, the oil market doesn't appear to be pricing in any extended blockade, but oil markets are likely to tighten further if Houthi attacks worsen."

In other oil news on Monday, Russia news agency Interfax reported that the fuel crisis in the former Soviet Union generated by relentless drone attacks from Ukraine “is gradually stabilizing,” as a number of refineries became operational again.

However, the situation remained “quite tense” in some regions, especially in pockets throughout Siberia.