-- Crude oil futures retreated on Tuesday as hopes for talks on a peace agreement tempered gains from the new US naval blockade after President Donald Trump hinted at renewed contact with Tehran.
Brent crude futures dropped 1.6% to $97.80 per barrel, while Murban oil futures held firm at $103.51/bbl.
While the US began blockading Iranian ports on Monday, market gains faded after Trump hinted at new contact from Tehran, despite warnings of a record global supply disruption.
"Crude oil gave up some of these gains late in the session after Trump claimed Iran wants to work a deal after the collapse of peace negotiations over the weekend," ANZ analysts said.
"Iran has not confirmed any further discussions. This suggests financial markets continue to look through the conflict to possible barrels being back on the market," they added.
Trump did not provide specifics on the reported diplomatic outreach and traders priced in the possibility of a longer-term ceasefire analysts said.
However, the situation on the water remains volatile. The US naval blockade of Iranian ports officially commenced Monday at 10:00 a.m. ET, an action Iran reportedly condemned as "an act of piracy."
Despite the slight cooling in futures, the physical reality of the crisis remains unprecedented.
International Energy Agency Executive Director Fatih Birol warned Monday that global oil supply disruptions have reached 13 million barrels per day, describing it as the greatest energy security threat in history.