Crude oil declined after Saudi Arabia cut prices for buyers in Asia, signaling that physical market supply is loosening as Middle East exports recover.

WTI futures fell 1.8% to settle near $89 a barrel, while Brent settled around $100 a barrel. As traders tried to sidestep geopolitical volatility tied to the Iran war, open interest in the front-month contracts of both benchmarks has trended lower in recent days, which has also amplified price swings.

Over the weekend, as Persian Gulf producers competed for market share while crude shipments through the Strait of Hormuz increased, Saudi Aramco lowered the price of Arab Light crude sold to Asia for November to a $5-a-barrel discount to the regional benchmark, a six-year low. By comparison, this month's discount was $2 a barrel. A Bloomberg survey showed traders and refiners had expected the price to rise by $5 from October.

Traders are also digesting a series of developments concerning the Strait of Hormuz, one of the biggest points of contention in the U.S.-Iran conflict. Axios, citing three U.S. officials, reported that senior U.S. cabinet members met at Camp David last week to discuss next steps in the Iran war and the Yemen conflict. Iranian state media reported that the country's interior minister departed for Doha on Monday for talks.

Bullish risks remain. After weeks of escalating clashes between Iran-backed Houthi forces and Saudi Arabia that also affected Saudi energy infrastructure, Yemen's internationally recognized government launched a full-scale military operation aimed at retaking areas controlled by the Houthis. Iran said the next "enemy mistake" against the country would bring "new fronts and bigger surprises." Iranian President Masoud Pezeshkian said negotiations with the United States are "meaningless."

Investors are also worried that an increasingly embattled Iran 鈥?a country reliant on oil revenue that shipped no crude by tanker last month 鈥?could respond by escalating the conflict. "Given that a comprehensive agreement between Iran and the U.S. still looks unlikely, we continue to expect significant volatility in both crude and refined products markets," said Bart Melek, global head of commodity strategy at TD Securities.

Meanwhile, Saudi Aramco CEO Amin Nasser said Monday at the Energy Intelligence Forum in London that oil inventories used to cushion global supply shocks are already "alarmingly low," and that unless the Strait of Hormuz reopens, the market risks further deterioration. He said that "while tight crude supply is already severe, refined product price increases have been even sharper."

WTI November futures fell 1.8% to settle at $89.43 a barrel. Brent December futures fell 1.9% to settle at $100.32 a barrel.