Brent crude and West Texas Intermediate crude prices fell sharply on Tuesday, dropping nearly 4 percent and more than 6 percent respectively, as hopes of renewed talks between the United States and Iran eased fears of prolonged supply disruptions. The decline followed a strong rally a day earlier, when prices surged after the United States military began a blockade of Iranian ports.

Market sentiment improved on expectations that negotiating teams from the United States and Iran could soon resume discussions, potentially in Islamabad. Analysts said earlier price gains had already reflected much of the disruption, prompting traders to unwind positions as diplomatic efforts appeared to gain momentum.

Despite the pullback, supply risks remain significant. The International Energy Agency said attacks on energy infrastructure and Iran's effective closure of the Strait of Hormuz caused the largest oil supply disruption in history in March, with 10.1 million barrels per day lost. The agency stressed that reopening the strait is critical to stabilizing energy markets and the global economy.

Iran has warned it could target ports in Gulf countries if tensions escalate further, while the United States military has extended its blockade to nearby waters. Analysts cautioned that if talks fail, prices could revisit recent highs, especially as global inventories decline and supply and demand forecasts point to continued strain in the months ahead.