Global economic slowdown weighs on crude prices, which continue to hover around an 8-month low.
NEW YORK (CNNMoney.com) -- Oil prices tumbled below $90 a barrel Monday, touching an 8-month low, as banking turmoil in Europe exacerbated fears that a global economic slowdown will crimp demand for oil and gas.
Crude prices were also pushed lower by a stronger U.S. dollar.
Light, sweet crude for November delivery was down $4.78 to $89.10 a barrel on the New York Mercantile Exchange.
Earlier in the session, oil prices plunged to $88.89 a barrel - a level not seen since Feb. 1, 2008, when it traded at $88.96 a barrel.
Oil has fallen 40% since the July contract peaked at $147.27 a barrel on July 11.
Global slide. The drop in oil prices comes amid a sharp selloff in overseas markets. London's FTSE and the DAX in Frankfurt both shed more than 7%. And Japan's Nikkei tumbled 4.25% - a four-month low.
Trading on Russia's RTX index was halted after it fell more than 20%. Russia's economy depends heavily on revenue from its vast energy resources and declines in the price of oil can upset the country's financial markets.
European markets were pressured by news over the weekend that the German government and a consortium of banks agreed to bail out mortgage lender Hypo Real Estate AG for $69 billion. German finance officials also announced plans to guarantee all private bank accounts.
Meanwhile, the government of Iceland said Monday that it would guarantee deposits in commercial and savings banks. Ireland announced a similar move last week.
U.S. markets didn't fare any better, with the Dow Jones industrial average falling around 4% in early trading, sinking below 10,000 for the first time since Oct. 29, 2004.
The retreat on Wall Street comes despite the passage of a historic $700 billion government intervention aimed at stabilizing the financial markets by absorbing illiquid assets that have made banks wary of lending.
"As bad as the financial situation is here in the U.S., it looks as if Europe and Asia are about to feel our pain... and that's not bullish for oil," wrote oil industry expert Stephen Schork in his daily newsletter The Schork Report.
Many investors see demand for oil and gas weakening as economic conditions worldwide continue to deteriorate.
"Less economic activity translates into less energy demand," said John Kilduff, an energy analyst at MF Global in New York.
Dollar rallies. Meanwhile, the U.S. dollar continued to show resilience against the euro and the pound but fell sharply against the yen.
"The dollar's rapid ascent has pushed down oil and all other dollar-denominated currencies," Kilduff said.
The euro traded at $1.3540, down from $1.3772 Friday. Earlier Monday, the euro hit $1.3471, the lowest level the currency has seen since Aug. 20, 2007.
The British pound bought $1.7401, down from $1.7690.
"As we look ahead, continued strength in the U.S. dollar will help ease crude oil prices even lower," Schork said.
Many investors buy oil as a hedge against dollar weakness and sell those assets when the dollar rebounds. A stronger greenback also deters overseas investors from buying oil and other commodities priced in dollars.
Gas slips. Prices at the pump continued to decline Monday, according to a daily survey by the American Automobile Association.
The national average price for a gallon of regular, unleaded gasoline fell 2 cents to $3.504 from $3.524, according to the motorist group's latest survey. That's down nearly 15% from the peak price of $4.114 a gallon hit on July 17.
Diesel prices also came down overnight. The national average price for a gallon of diesel fuel fell to $4.016 from $4.036. 
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