RoydadNaft –  Brent crude futures fell $1.75, or 1.98%, to $86.61 a barrel. U.S. West Texas Intermediate (WTI) crude futures declined $1.26, or 1.53%, to $81.35 a barrel.

According to Roydad Naft, oil prices continued their downward trend on Tuesday, reaching their lowest level in more than a week. The decline came amid growing hopes for a resolution to the conflict between the United States and Iran, as traders assessed developments in the Middle East.

Brent crude futures were trading at $86.61 a barrel as of 10:09 a.m. GMT, down $1.75 or 1.98%, hitting their lowest level since July 17. U.S. West Texas Intermediate crude also fell $1.26, or 1.53%, to $81.35 a barrel, marking its lowest point since July 20.

U.S. President Donald Trump said on Monday that Washington was engaged in “good talks” with Iran and that a resolution of differences was possible. He warned, however, that American strikes would resume if the negotiations failed. Iran issued similar statements about a reciprocal response.

Giovanni Staunovo, an analyst at UBS, said: “Although vessel traffic through the Strait of Hormuz remains low, the market is hopeful that new talks between Oman and Iran on a fresh mechanism for Hormuz will improve the situation.”

According to a Gulf source who spoke to Reuters on Tuesday, Oman has proposed to Iran the creation of a joint regional mechanism to manage the Strait of Hormuz with voluntary fees.

The Strait of Hormuz handles about one-fifth of global oil consumption and is one of the world’s most critical strategic oil transit points.

The conflicts have also disrupted shipping beyond the Strait of Hormuz, affecting traffic through the Bab el-Mandeb Strait. Prices rose last week amid concerns that the Bab el-Mandeb route—the second most important strategic chokepoint after Hormuz—could be closed.

However, data from Kpler showed that the number of vessels transiting the Bab el-Mandeb reached 28 on Monday, the highest level in four days, while traffic through the Strait of Hormuz remained low.

Analysts warned that the risk of supply disruptions spreading to the Red Sea remains high. Saudi Arabia said it had shot down drones launched toward oil targets, including Riyadh. The kingdom stated that armed groups had fired the weapons from Iraqi territory and reserved the right to respond.

In a separate development, Yemen said it had targeted the East-West pipeline, which carries oil to Saudi Arabia’s main Red Sea port of Yanbu, in response to the penetration of Saudi drones.

Goldman Sachs forecasts that if the Strait of Hormuz fully reopens by the fourth quarter, Brent prices could ease to $80 by year-end. Nevertheless, disruptions in the Red Sea and attacks on Saudi oil infrastructure could introduce a new source of upside risk for crude oil and petroleum product prices.