US crude oil futures fell sharply and stock futures got a brief boost after Iran said it planned to release British navy personnel it had captured.
But the news was quickly offset by data showing March was the worst month in four years for the services sector of the US economy.
Crude futures slipped as low as $63.56 per barrel after Iranian President Mahmoud Ahmadinejad said Iran would free 15 detained Britons.
The dispute between Britain and the world's fourth largest oil exporter has been a key driver of oil prices since March 23rd, when the sailors and marines were captured in what Iran said was its territorial waters.
US light crude for May delivery was down 73 cents to $63.96 a barrel.
The dollar briefly pared losses against the euro after Iran's announcement, but turned lower again after the US economic data, pushing the euro to $1.3380. The dollar also fell against the Japanese currency to 118.71 yen.
The Institute for Supply Management said its monthly non-manufacturing index fell to 52.4 last month, below the 55 reading economists had forecast. The employment component of the report fell to 50.8 from 52.2 in February.
February's ISM report had already shown a sharp pullback, leading many analysts to expect a pullback. Friday's non-farm payrolls report may shed more light on the health of the US economy.
US government bonds rose on the ISM report, with the benchmark 10-year note up 7/32 for a yield of 4.6 per cent.