Brent North Sea crude for delivery in September plummeted $3.01 to $103.82 a barrel in London midday deals.
New York's main contract, light sweet crude for September, sank $2.76 to $89.07.
"The flaring up of the debt crisis in the eurozone has halted the rise in oil prices," said Commerzbank analyst Carsten Fritsch.
"Since Friday, oil prices have been sliding. As the week gets underway, prices are continuing to drop, under pressure from a firmer US dollar and falling equity markets."
World stock markets tumbled and the euro slumped to its lowest level against the yen in almost 12 years on Monday as Spain's debt crisis deepened, raising concerns over the wider eurozone.
With borrowing costs hitting the danger levels that forced Ireland, Greece and Portugal to seek a bailout, investors are concerned that Spain, one of the eurozone's biggest economies, will also have to call in help.
Investors were also keeping watch on bailed-out Greece, with auditors from the European Union, International Monetary Fund and the European Central Bank due in Athens this week for another inspection of the new government's economic programme.
Price rose in recent sessions, hitting two-month highs Thursday, as traders worried that rising tensions in the oil-rich Middle East would hamper supplies.
