Oil continued its sharp decline after President Donald Trump said the United States and Iran were holding talks in an attempt to end the Middle East conflict, with both sides continuing to refrain from launching attacks.

The price of Brent crude, the global benchmark, fell below $85 a barrel after plunging 8.7% on Monday, its biggest drop in more than three months. West Texas Intermediate crude traded near $80.

Trump said he decided to suspend the strikes to give negotiations another chance, according to Axios. He also told reporters aboard Air Force One that there was a good chance of progress in the talks. However, it remains unclear whether any substantive discussions are taking place.

Oil prices fluctuate amid developments in the Middle East

Crude oil has experienced sharp fluctuations this month, initially rising as hostilities between Washington and Tehran escalated and the conflict spilled over into the Red Sea, then falling as tensions eased in recent days. However, traders remain cautious, as tanker traffic through the Strait of Hormuz has yet to return to normal.

ING analysts Warren Patterson and Eva Mante wrote in a note: “A rebound in flows through the Strait of Hormuz is necessary if this decline is to continue.” They added: “Furthermore, even if an agreement is reached, the market is expected to continue pricing in a significant risk premium, given recent developments that have shown how quickly any deal could fall apart,” according to Bloomberg.

Traffic observed through the Strait of Hormuz was limited early Tuesday, although some vessels appeared to have sailed through it without their transponders switched on. Tracking the actual volume of oil shipments transiting the strait has become increasingly difficult with the passage of unmarked vessels.

The previous day, only four ships passed through, according to Kpler data. Around 25 cargo ships transited the Bab el-Mandeb Strait on Monday, including several carrying Russian oil shipments through the Red Sea, Kpler reported.

Talks to resume shipping through the Strait of Hormuz

In the Middle East, negotiators from Iran and Oman are trying to reach an agreement to resume shipping through the Strait of Hormuz, which connects the Arabian Gulf to global markets and used to carry a fifth of the world's daily oil flows in peacetime.

Meanwhile, Iranian Foreign Minister Abbas Araqchi held two telephone conversations with his Saudi and Omani counterparts late Monday, calling for cooperation on the Strait of Hormuz, according to a statement from the ministry.

Iran and Oman, which also border the Strait of Hormuz, are continuing discussions after their officials met in Tehran over the weekend, according to people familiar with the matter. They said that reaching a successful agreement would then allow Iran and the United States to resume talks on ending their war.

The Iranian military said it halted its attacks on US bases and forces in the region as a result of Trump's decision to refrain from launching strikes. Tehran had been carrying out attacks on countries such as Kuwait, Bahrain, and Jordan almost daily during the two weeks preceding the US suspension of its strikes on Friday.

Later on Tuesday, President Trump is scheduled to meet with Israeli Prime Minister Benjamin Netanyahu in Washington for talks on Iran. The two countries launched a war in February in an effort to thwart Tehran's nuclear program.

Supply disruptions eased elsewhere, with Kazakhstan's main terminal resuming loading operations after Ukrainian drone attacks halted exports. The Energy Ministry said two tankers had begun loading at the Caspian Pipeline Alliance facility near the Russian port of Novorossiysk.

For its part, Macquarie Group Ltd warned that the supply glut is likely to return before the end of the year, amid increasing pressure on Washington to end the conflict with Iran.

She said that once an agreement is reached, the oil market will be in a state of significant oversupply, with a daily surplus of two million barrels expected in the fourth quarter.

Latest price movements:

Brent crude futures for September settlement fell 3.9% to $84.88 a barrel by 9:52 a.m. in London.

West Texas Intermediate crude futures for September delivery fell 3.2% to $79.99 a barrel.