Oil prices slid this evening after Saudi Arabia, the world's biggest crude exporter, repeated its pledge to make up for lost Iranian output, easing supply concerns.
Brent North Sea crude retreated $1.63 to $124.08 a barrel in London. US crude shed $1.88 to $106.21 a barrel.
IMF chief Christine Lagarde warned today that crude oil prices may spike by up to 30% if Iranian supplies are disrupted, causing "serious consequences" for the global economy.
"Clearly it would be a shock to economies if there was a major shortage of exports of oil out of Iran, it would certainly drive up prices for a period of time," Lagarde told reporters in New Delhi, wrapping up a two-day visit.
Lagarde's comments came a day after the Saudi cabinet released a statement vowing to "ensure adequate oil supply, stabilise (the) oil market and bring down oil prices to reasonable levels to both producers, consumers, and the petroleum industry," according to Arab News, a Saudi-based newspaper.
Saudi oil minister Ali al-Naimi had already said last week that the country stood ready to cover any shortfalls of supplies in the market.
The assurances from Saudi Arabia come as the West ramps up sanctions on Iran - the world's fourth largest oil producer - in an effort to make it halt its nuclear activities, which they fear include research on developing atomic weapons.
The International Energy Agency has previously said that it expects exports from Iran to fall by about 800,000 barrels per day to one million barrels in the second half of this year.