NEW YORK, June 29 (Reuters) - Crude futures hit 3-week lows on Monday as Greece shut its banks and imposed capital controls, causing widespread risk aversion, while Iran looked likely to extend nuclear negotiations with the West to export more of its oil into an oversupplied market.
The dollar initially surged against the euro on the Greek jitters, but it later retreated, limiting the downside for oil. A softer dollar makes commodities priced in the greenback more affordable for holders of other currencies.
Brent crude futures settled down $1.25, or almost 2 percent, at $62.01 a barrel, its weakest finish since June 5.
U.S. crude closed down $1.30, or 2.2 percent, at $58.33 a barrel, its lowest settlement since June 8.
"It's all about Greece today," said oil bear Tariq Zahir of Tyche Capital Advisors in Laurel Hollow, New York. "Also, the Iran deadline for a nuclear pact could be pushed out by a week or so from tomorrow, so it's a risk-off day."
Greeks woke up on Monday to shuttered banks, closed cash machines and a climate of rumours and conspiracy theories as a breakdown in talks between Athens and its creditors plunged the country deep into crisis.
Still, the euro proved broadly resilient after Greece moved one step closer to an exit from the single currency.
Some analysts said crude prices could weaken further as the Greek situation will probably not be resolved until a referendum this weekend on whether to accept conditions for a bailout.
"This may be the time when we break lower and into the $50s for Brent as we have a full week of uncertainty," said Bjarne Schieldrop, head of commodity analysis at SEB in Oslo.
U.S. and Iranian officials said talks on a final nuclear pact for Iran would probably run past a June 30 deadline. The agreement is crucial to ending Western sanctions on Tehran's crude exports, allowing it to add to the global glut.
Market participants will also be watching for estimates on U.S. crude supply-demand due on Tuesday from industry group American Petroleum Institute, ahead of government inventory numbers on Wednesday.
While the trading week will be shortened by Friday's U.S. Independence Day holiday, a host of data is scheduled over the next three days, including Chinese, eurozone and U.S. manufacturing statistics and U.S. employment numbers for June.
(Additional reporting by Simon Falush in London and Aaron Sheldrick in Tokyo and Keith Wallis in Singapore; Editing by Lisa Von Ahn)
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