Oil prices fell and government bonds rebounded on Monday as investors bet that this week's UN General Assembly in New York might bring diplomatic progress in the Middle East conflict. Brent crude fell more than 3 per cent to as low as $100.20 a barrel, its lowest level since September 10, while West Texas Intermediate dropped below $97 a barrel. US Ambassador to the UN Mike Waltz said the 'door is open for Iran back to the negotiating table if they do so in good faith.' On Sunday, a Fox News reporter said US President Donald Trump had told him he would 'probably be open' to meeting Iranian President Masoud Pezeshkian on the sidelines of the UN General Assembly beginning on Tuesday.

Van Luu, global head of solutions strategy at Russell Investments, noted that the US 'saying that negotiations remain on the table explains the drop in oil,' though he added the fall is striking given Iran-backed Houthis escalated attacks on Saudi Arabia over the weekend. European government bonds regained ground, with France's 10-year yield down 0.13 percentage points to 4.45 per cent and Italy's 10-year yield falling 0.11 percentage points to 4.33 per cent.

European stock markets also recouped losses, with the Stoxx Europe 600 rising 1.1 per cent. Mohit Kumar at Jefferies said their view remains that tensions in the Middle East have peaked and some normalization is expected in the coming weeks, with the first couple of weeks of October potentially offering a 'sweet spot' for US-Iran negotiations.