NEW YORK (Reuters) - Oil dropped by more than seven percent to below $49 a barrel yesterday, weighed down by the stronger US dollar and weaker stock markets.

US oil for May delivery settled at $48.41 a barrel, down $3.97. The contract fell $1.96 to settle at $52.38 a barrel on Friday, pulling back from Thursday's four-month high.

London Brent crude settled $47.99 a barrel, down $3.99.

"The weaker stock market, the stronger dollar — those are the two main factors in crude's big fall today," said Phil Flynn, an analyst at Alaron Trading in Chicago.

The dollar rallied yesterday as fears of bankruptcy for US automakers GM and Chrysler LLC prompted anxious investors to seek safety in the US currency.

A White House task force rejected restructuring plans from the two automakers and instead forced out General Motors' chief executive and pushed Chrysler toward a merger.

US stocks dropped on the news of the Obama administration's rejection of GM and Chrysler's turnaround plans, dragging down oil prices further.

Bank bailouts by three European governments also pressured stocks.

Weakness in the global economy continued to be one of the underlying factors pressuring oil prices.

Industrial output from Japan, the world's No. 3 energy consumer, fell by a greater-than-expected 9.4 percent in February, as weak demand weighed on the country's economy.