LONDON (Reuters) – Oil prices fell more than 2% on Monday on signs of progress in talks between the U.S. and Iran while investors remained concerned about economic headwinds from tariffs which could curb demand for fuel.

Brent crude futures slipped $1.54, or 2.3%, to $66.42 a barrel by 1230 GMT after closing up 3.2% on Thursday. U.S. West Texas Intermediate crude was at $63.10 a barrel, down $1.58, or 2.4%, after settling up 3.54% in the previous session. Thursday was the last settlement day last week because of the Good Friday holiday.

“The U.S.-Iran talks seem relatively positive, which allows for people to start thinking about the possibility of a solution,” said Harry Tchilinguirian, group head of research at Onyx Capital Group. “The immediate implication would be that Iranian crude would not be off the market.”

Markets Lower Liquidity Due to Easter

Markets also have lower liquidity due to the Easter holiday, which can exacerbate price moves, he added.

In the talks, the U.S. and Iran agreed to begin drawing up a framework for a potential nuclear deal, Iran’s foreign minister said, after discussions that a U.S. official described as yielding “very good progress.”

The progress follows further sanctions by the U.S. last week against a Chinese independent oil refinery that it alleges processed Iranian crude, ramping up pressure on Tehran.

Markets also came under stress on Monday, after U.S. President Donald Trump last week made criticisms about the Federal Reserve. Gold prices rose to another record, with jitters rippling into energy markets due to concerns about demand, according to analysts.

“The broader trend remains tilted to the downside, as investors may struggle to find conviction in an improving supply-demand outlook, especially amid the drag from tariffs on global growth and rising supplies from OPEC+,” said IG Market Strategist Yeap Jun Rong.

OPEC+, the group of major producers including the Organization of the Petroleum Exporting Countries and allies such as Russia, is still expected to increase output by 411,000 barrels per day starting in May, though some of that increase may be offset by cuts from countries that have been exceeding their quotas.

Reuters Poll Shows Tariff Policy Would Slowdown Economy

A Reuters poll on April 17 showed investors believe the tariff policy will trigger a significant slowdown in the U.S. economy this year and next, with the median probability of recession in the next 12 months approaching 50%. The U.S. is the world’s biggest oil consumer.

Investors are watching for several U.S. data releases this week, including April flash manufacturing and services PMI, for direction on the economy.

“This week’s series of PMI releases could further underscore the economic impact of tariffs, with both manufacturing and services conditions across major economies expected to soften,” IG’s Yeap said, adding oil prices face resistance at the $70 level.

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(Reporting by Anna Hirtenstein in London. Additional reporting by Florence Tan and Trixie Yap in Singapore; Editing by Kate Mayberry and Chizu Nomiyama, Kirsten Donovan)