Brent crude futures dropped in early European trading as market participants reacted to reports of diplomatic progress between the United States and Iran.
The price decline followed news that negotiators in Geneva had reached a preliminary understanding on a safety line for the Strait of Hormuz, a critical chokepoint for global energy flows.
The sell-off in oil prices reflects a rapid repricing of geopolitical risk.
Traders who had bid up energy costs in anticipation of potential supply disruptions are now scaling back those positions.
The development suggests that the immediate threat to tanker traffic through the strait has diminished, at least in the short term, reducing the premium investors were willing to pay for supply security.
According to multiple wire services, the talks in Geneva focused on the technical implementation of a temporary agreement to ensure safe passage for commercial vessels.