Global oil prices declined on Tuesday after investors reacted to signs of possible diplomatic progress between the United States and Iran, reducing immediate concerns over supply disruptions in the Middle East.

Brent crude futures fell by 54 cents, or 0.6%, to $86.80 per barrel, while US West Texas Intermediate (WTI) crude dropped 66 cents, or 0.8%, to $80 per barrel. During early trading, both benchmark contracts briefly lost nearly 1%, touching their lowest levels in more than a week.

US President Donald Trump said "positive talks" with Iran were ongoing, raising hopes for a diplomatic solution to the conflict. However, he warned that military strikes could resume if negotiations fail. Iran has also signalled it may respond if tensions escalate again.

Analysts said the temporary pause in hostilities has eased concerns about disruptions to oil shipments from the Middle East, although the overall situation remains uncertain.

Meanwhile, Yemen's internationally recognised, Saudi-backed government accused Houthi rebels of attempting to create instability around the Bab al-Mandab Strait, similar to the risks facing the Strait of Hormuz. Experts believe the Houthis may not be able to fully block shipping, but maritime traffic through both strategic waterways has already slowed.

According to Barclays analysts, net daily exports of crude oil and refined products through the Strait of Hormuz fell to around 2.9 million barrels in the week ending July 24, down sharply from 5.9 million barrels a week earlier.

A preliminary US industry survey also suggested crude oil and petrol inventories declined last week, while diesel and other distillate fuel stocks likely increased.