Brent crude futures retreated 20 cents, or 0.3%, to settle at $77.70 a barrel, as renewed diplomatic engagement between the United States and Iran helped alleviate immediate fears of a supply disruption in the Strait of Hormuz.
The pullback in energy prices reflects a rapid repricing of the geopolitical risk premium that had been supporting crude valuations.
While the initial market reaction saw a sharper drop, prices rebounded slightly in the session, indicating that traders are balancing optimism over peace talks with caution regarding the long-term security of the chokepoint.
The Strait of Hormuz remains a critical artery for global energy flows, and any disruption would have severe implications for supply chains.
However, the current diplomatic thaw has reduced the probability of an immediate transit blockade, allowing markets to unwind some of the tension-driven bid.
Despite the easing of immediate hostilities, Iran has ruled out a return to pre-war conditions in the Strait, even amidst potential US sanctions relief.