Doha: Oil prices plunged around 6% on Tuesday as intensified diplomatic efforts between the US and Iran raised hopes for an agreement to reopen the Strait of Hormuz, easing concerns over potential supply disruptions.

According to Anadolu Agency, international benchmark Brent crude futures fell to around $79 per barrel as of 1550GMT, down about 5.7% from the previous close of $83.77. This marked the first time Brent crude dropped below $80 since July 13. Meanwhile, the US benchmark West Texas Intermediate (WTI) saw a decline of about 5.9%, dropping to $75.60 per barrel from its previous close of $80.34.

US Treasury Secretary Scott Bessent indicated that Washington and Tehran were engaged in ongoing negotiations and could potentially reach an agreement as early as Tuesday or Wednesday to reopen the strategic waterway. 'We are in talks with the Iranians,' Bessent informed CNBC, highlighting the possibility of a deal to open the strait and progress towards normalizing the conflict.

Iranian Foreign Ministry spokesman Esmaeil Baghaei, however, clarified that Tehran was not involved in direct negotiations with Washington. Instead, discussions facilitated by Omani mediation were focused on ensuring the safe passage of commercial vessels. Qatar also confirmed its involvement, maintaining contact with both parties and circulating a proposed de-escalation plan, though no definitive timeline for an agreement was set.

The anticipation of a possible ceasefire and the resumption of shipping through the strait helped reduce the geopolitical risk premium that had previously driven oil prices higher in July. Additionally, oil prices faced downward pressure from OPEC+'s decision to proceed with a planned production increase of 188,000 barrels per day in September.