Global oil prices retreated further on Tuesday as the absence of fresh hostilities between the United States and Iran for a fourth consecutive night reinforced expectations that diplomacy could avert another disruption to global crude supplies, weakening the geopolitical premium that had lifted prices sharply in recent weeks.
As at the time of writing 06:32 a.m. (WAT), Brent crude traded at $87.11 per barrel, down 1.41 per cent, while West Texas Intermediate (WTI) slipped 1.28 per cent to $81.55 per barrel.
The latest decline came after a fourth consecutive night passed without fresh attacks by either Washington or Tehran, reinforcing market expectations that both countries are giving diplomacy another opportunity despite maintaining military readiness.
Investor sentiment improved after US President Donald Trump disclosed that Washington was engaged in what he described as "good talks" with Iran, signalling that diplomatic efforts were gaining momentum. Iranian officials also acknowledged ongoing discussions but stressed that Tehran remained prepared to respond should negotiations collapse.
The improving diplomatic outlook has prompted traders to unwind part of the war premium that had fuelled a sharp rally in crude prices over the past two weeks.
Despite the pullback, the market remains on edge as shipping risks continue across strategic Middle East trade routes. While fears of a blockade in the Strait of Hormuz have eased for now, renewed Houthi attacks on Saudi oil infrastructure have disrupted traffic through the Bab el-Mandeb Strait, sustaining concerns over regional energy security.
Analysts note that although the Houthis cannot exert the same influence over global oil supplies as Iran through the Strait of Hormuz, continued attacks in the Red Sea remain capable of disrupting cargo movements and increasing freight costs.
At the same time, weakening fuel demand is beginning to weigh on prices. Recent inventory data from the US Energy Information Administration showed broad increases in crude and refined product stockpiles, suggesting that higher oil prices may already be curbing consumption in the world's largest economy.
Attention is now turning to fresh inventory estimates from the American Petroleum Institute later on Tuesday, with traders looking for further evidence of slowing demand or tightening supplies.
Although crude prices have retreated, market analysts caution that volatility is likely to persist. Any collapse in negotiations between the United States and Iran or renewed military escalation could rapidly restore the geopolitical premium, while sustained diplomatic progress may trigger further declines in international oil benchmarks.