Oil prices softened on Tuesday, with markets weighing reports of mediation efforts between the US and Iran against an exchange of fresh attacks between the two.
Brent crude futures eased 78 cents, or 0.9%, to $88.44 per barrel by 0415 GMT. US West Texas Intermediate crude was down 73 cents, or 0.9%, to $82.50 per barrel, while the more active contract for September delivery slipped 41 cents, or 0.5%, to $82.07 a barrel.
"There's some hope of de-escalation between the US and Iran. Reports are that mediators are proposing a 10-day ceasefire, which could put the Memorandum of Understanding (MoU) back on track," ING analysts said in a note, referring to the June interim deal.
However, this won't be easy as major differences remain between Washington and Tehran, while Trump has warned of retaliation after several US troops were killed, ING added.
A senior Iranian official told Reuters Tehran had received a proposal from mediators for a 10-day ceasefire in efforts to salvage the deal signed on June 17, intended to pave the way for a lasting agreement to end the war that began on February 28 with US-Israeli attacks on Iran.
The diplomatic push followed another night of US strikes on Iranian cities and attacks by Iran's Revolutionary Guards on US military assets across the region.
Later on Monday, the US Central Command said it had begun another round of strikes on Iran.
A tanker in the Strait of Hormuz reported being struck by an unknown projectile, forcing its crew to abandon ship and board a lifeboat, the United Kingdom Maritime Trade Operations agency said on Tuesday.
Vessel crossings via the strait also dropped further amid growing caution following fresh attacks between the US and Iran.
Meanwhile, US crude oil stockpiles were expected to have fallen last week alongside gasoline, while distillate stocks likely rose, a preliminary Reuters poll showed on Monday.
