Global oil prices fell by more than 5% on Tuesday, reaching their lowest levels in three weeks, as renewed optimism over US-Iran diplomatic negotiations raised expectations of improved oil flows through the Strait of Hormuz.

Brent crude futures declined $4.44, or 5.3%, to $79.33 per barrel, while US West Texas Intermediate (WTI) crude dropped $4.52, or 5.6%, to $75.82 per barrel. Both benchmark contracts touched their lowest levels since July 13.

Market sentiment improved after US Secretary of State Marco Rubio said progress had been made in discussions involving Iran and Oman to facilitate greater shipping activity through the Strait of Hormuz, although a final agreement has yet to be reached. Earlier, US Treasury Secretary Scott Bessent indicated that an agreement to reopen the strategic waterway could be reached as early as Tuesday or Wednesday.

Adding to the positive sentiment, Qatar's Foreign Ministry confirmed that diplomatic efforts to resolve the regional conflict remain ongoing. Meanwhile, fresh rounds of US-facilitated talks between Israel and Lebanon also began this week, further easing geopolitical concerns in energy markets.

Analysts said hopes of a diplomatic breakthrough have reduced the geopolitical risk premium that had supported oil prices since the conflict escalated earlier this year. If negotiations continue to make meaningful progress, the likelihood of prolonged supply disruptions could diminish, placing additional downward pressure on crude prices.

Despite the decline, uncertainty remains over oil exports through the Strait of Hormuz, a key shipping route that previously handled around 20% of global oil and gas trade. Reports indicate Iran is seeking greater oversight of shipping movements through the waterway as part of ongoing discussions with Oman.

Market participants continue to closely monitor diplomatic developments, with analysts expecting Brent crude to trade within the $80–$90 per barrel range until either a formal US-Iran agreement is reached or geopolitical tensions escalate further.