(MENAFN- AFP) Oil prices plunged Monday as investors digested the implications of Greece rejecting tough austerity demands from creditors that could send the debt-strapped nation crashing out of the eurozone, analysts said.
The crude market was also pushed sharply lower by the prospect of returning Iranian crude oil supplies, they added.
Brent North Sea crude for August delivery plummeted $1.98 to $58.34 a barrel in London early afternoon deals, compared with Friday's closing level.
West Texas Intermediate for August delivery plunged $2.79 to $54.14 a barrel compared with Thursday, after which US markets shut ahead of the long Independence Day holiday weekend in the United States.
"Commodity markets have largely responded in the ways we had anticipated to the growing risks of Grexit," said analyst Julian Jessop at research house Capital Economics.
"Oil prices in particular have fallen, undermined also by the prospects of a deal with Iran and signs of recovery in the US rig count."
Greek voters overwhelmingly rejected the bailout terms demanded by international creditors, with official figures from Sunday's referendum showing 61.31 percent voting 'No' and 38.69 percent voting 'Yes'.
"The result of the Greek referendum has thrust the world into uncharted territory," Singapore's DBS Bank said in a market commentary.
Greece's voters decisively rejected international creditors' tough bailout terms Sunday, but Greek premier and Syriza leader Alexis Tsipras insisted the result does not mean a "rupture" with Europe despite fears it will end in a "Grexit" from the eurozone.
The oil market also slid on last-ditch negotiations between Western powers and Iran on curbing Tehran's nuclear ambitions.
Foreign ministers from major powers held crunch talks in Vienna on Monday, seeking to seal a historic nuclear deal to end a 13-year standoff, one day before a final deadline.
The United States, Russia, China, Britain, France and Germany want Iran to sharply curb its nuclear programme to make any push to acquire the atomic bomb all but impossible, in return for sanctions relief.
Iran denies wanting nuclear weapons, saying its activities are purely for peaceful purposes such as generating electricity and treating cancer patients.
A historic nuclear deal could result in rebounding oil production from the Islamic republic, a key member of the OPEC oil producers' cartel.
Oil prices are also under pressure from continued high US crude output which is adding to the already oversupplied global market.
"A report by Baker Hughes on the increase in (US) oil rigs added to the woes of the benchmark prices, which are already under pressure from the ongoing Greek crisis and Iran nuclear negotiations," said Sanjeev Gupta, head of the Asia-Pacific Oil and Gas practice at professional services firm EY.
"With the Greek referendum voting against acceptance of the bailout and the new deadline of 7 July for reaching an agreement with Iran, oil markets will continue to remain bearish," he said.
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