Oil Prices Drop Amid Hopes for US-Iran Diplomatic Solution

Oil prices dropped by 1% on Tuesday as investors weighed a pause in US strikes on Iran, raising hopes for a diplomatic solution and normalizing Middle East energy supply.

Oman has won backing from Gulf states for a plan to let Tehran collect voluntary fees to use the Strait of Hormuz, a key oil shipping chokepoint. The proposal is seen as a step towards ending disruptions to oil trade caused by the US-Israeli war on Iran.

Brent crude futures fell $1.68, or 1.90%, to $86.68 per barrel, while U.S. West Texas Intermediate crude was at $81.33 a barrel, down $1.28, or 1.55%. Both benchmarks hit their lowest since July 17.

US President Donald Trump said on Monday that Washington was having 'good talks' with Iran and that there was the chance of a resolution. However, he also warned that US strikes would resume if negotiations failed.