Up to level 13 and currently just completed the 'RAZOR' quest. Problem is, none of the characters will respond with any dialogue but only show their inventory. Of course, this means I am unable to buy or sell. This has been going on for some time now and I have merely been storing items at 'Frost-Spire'. Also cannot advance any current quests without some dialogue. Do not see any stolen items in my inventory but occasionally get arrested (likely for trespassing at a site at the wrong time of day or night). Paying the fine doesn't seem to help much as lack of dialogue continues from, it appears, all but the guards. Believe I had the same issue quite some time back in the game but do not recall what the solution was. Would like to get a solution to this rather than going back quite a way for a save that does work. Am running game via GOG on a Windows 10 system. THANKING ALL RESPONDERS IN ADVANCE!!!!

Did you install a mod before that happened?

It could be caused by a mod or a conflict between different mods.
Did you install the Unofficial Patches?
Another potential reason is one or several corrupted files.

I do not utilize any modifications. At any time on any game!!! I am not familiar with Unofficial Patches nor do I believe I have installed any of these. Not being able to get any type of dialogue kind of kills the game where it currently is. I can continue to play, but to what end?? If no solution is offered I will have no choice but to take a big step backwards to an older save!! I suppose it could be worse!

The Unofficial Oblivion Patch is highly recommended (and the Unofficial Shivering Isles Patch, too, if you play Shivering Isles). There are Unofficial DLC Patches, too, which are also useful, but to install them sometimes creates new problems - for which there exists a simple solution (to install yet another patch), but I suppose you can live without unless you stumble on a severe issue when playing the DLCs (like Wizard's Tower).
With that said, the Unofficial Patches are mods, but they do fix a high number of problems. You find the one for Oblivion there: https://www.nexusmods.com/oblivion/mods/5296. For the others, use the search function at the site.

I can't say whether or not an Unofficial Patch would fix your problem (considering your second post, I'd say rather not). Another highly recommended action when you have problems is to make sure you don't have corrupted game files. How you can do this depends on your Oblivion installation. If you use the direct download version, you could re-download Oblivion, and then install it again. If you use Galaxy, there might be a Verify function similar to Steam's - I myself don't use Galaxy.

To eliminate other potential problem causes I recommend to find out, if your problem is still there when you load an older savegame, or start a new game.
It is possible that your savegame is corrupted. In this case, I'm afraid you'll have to load an older savegame indeed.

As an old-time gamer (87) I should be ashamed to have gotten bit by the 'stolen' bug. The solution to my problem was not to have any 'stolen' item(s) in your inventory - neither on your person nor stored anywhere!! I found on a chance look at the inventory I had left at Frostcrag Spire two items indicated as stolen 'a love letter' and 'a blank piece of parchment'. I dropped both items on the floor of my living quarters there and now everything is beautiful. Fortunate that I took this step as a last ditch effort before I reverted some 30 hours back to a previous save!! Worked in the computer field since 1965 (but not PC's since early 1990's. Purchased (for those of you old enough to recall) two Magnovox Odyssey sets!! Now for sale on ETSY for $500.00!!!!. Cut my baby teeth on "Might & Magic" and can't recall how many games I've played. RPG's are the genre for me!! THANKING YOU ALL FOR YOUR INTEREST AND ASSISTANCE!!!!!