NEW YORK — Oil prices tumbled more than $10 a barrel Monday, dropping back below $100 as a U.S. financial bailout failed to win legislative approval, raising fears of a prolonged economic downturn that could drastically erode global energy demand.

Light, sweet crude for November delivery sank $10.52, or 9.8 percent, to settle at $96.36 on the New York Mercantile Exchange, after earlier dropping as low as $95.04.

The dramatic sell-off capped a week of frenzied volatility in oil markets.

A week earlier, prices shot up over $16 to $120.92 a barrel in the biggest one-day dollar gain ever. But as disagreements over the government's $700 billion bailout plan intensified over the last several days, oil market traders began moving out of their positions at a rapid clip; Monday's decline was the second largest ever in dollar terms and the biggest percentage-wise since 2001. Crude has now fallen almost $25, or 20 percent, in the last seven days.

Monday's nosedive came as House lawmakers defeated the emergency measure, which would have absorbed billions of dollars in banks' bad mortgage-related debt and other risky assets in a bid to steady the teetering economy. Democratic and Republican lawmakers pledged to try and work out another deal, but oil markets traders viewed the defeat as another bearish weight on oil.

"This is an acknowledgment that the global slowdown is here and energy demand is not going to be what it was," said Phil Flynn, energy analyst at Alaron Trading Corp. in Chicago.

Oil market traders were skeptical before the plan was voted down. Many doubted it would go far enough to unfreeze credit markets and restore calm to the financial system. If the economy worsens, analysts say businesses could be forced to lay off workers, leading Americans to cut back on driving and other energy use in the world's largest consumer.

Energy consumption overseas is also expected to drop, even in fast-growing developing countries such as India and China, where booming demand for cars and other goods helped drive the oil bubble earlier this year.

"With demand falling at the pace it is, nothing can support crude at levels above $100," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com. "There's no underlying demand from any pocket."

Other commodities also traded sharply lower Monday as investors bet that a widening economic malaise will swallow demand for building materials, grains and other goods.