Benchmark U.S. crude dropped by $1.36 to $101.10 per barrel in New York while Brent crude lost $2.26 to $120.41 per barrel in London. Global stock markets also fell, along with the prices of most other commodities.
A number of reports raised concerns about economic growth. A private survey showed that U.S. small business owners were increasingly worried about high fuel prices. The government said wholesalers restocked their shelves at a slower pace at the beginning of the year. And China said that European demand for its manufactured goods is declining -- one more sign that the world's second-biggest economy is slowing.
Those reports follow last week's disappointing U.S. jobs report. The government said that employers added only 120,000 jobs in March -- half as much as the previous three months.
The impact of high oil prices on the economy is now more of a concern to the market than a possible military conflict in Iran, analysts say.
As a result, "the air is slowly being leaked out of this bubble that's grown over the past few months" in oil prices, independent trader and analyst Stephen Schork said.
Oil prices could fall further in coming months if Iran agrees to negotiate with the United Nations over its nuclear program. The oil-rich nation is expected to resume talks with members of the U.N. Security Council this weekend.
Western nations fear Iran is building a nuclear weapon. They've imposed sanctions meant to shrink Iran's oil revenue and force it to open its facilities to inspection. Iran denies the claims, and has rejected inspections.
Earlier Tuesday, Iran said it cut off oil shipments to Greece. President Mahmoud Ahmadinejad asserted that his country can get by for two or three years without selling more oil.
Peter Donovan, an oil broker with Vantage Trading, said traders have gotten used to such rhetoric from Ahmadinejad. He said the Iranian leader was just "posturing" before the weekend meeting.
Retail gasoline prices fell less than a penny overnight to a national average of $3.922 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Gasoline is the highest ever for this time of year, though it's declined slightly since last week.
In other energy trading, heating oil gave up 5.09 cents to $3.095 per gallon and gasoline futures lost 4.89 cents to $3.2478 per gallon. Natural gas fell by 5 cents to $2.057 per 1,000 cubic feet.