Global oil prices fell sharply after signs of easing tensions between the United States and Iran raised hopes of renewed diplomatic talks and reduced fears of supply disruptions.

Brent crude dropped 5.2% to about $92 per barrel, while U.S. crude fell 5.4% to $84.45 per barrel as both countries paused further military action.

The decline followed reports that the U.S. was giving diplomacy a chance, while Iran indicated it would suspend retaliatory attacks on neighbouring countries. The developments also eased concerns over the security of the Strait of Hormuz.

Oil prices had surged above $100 per barrel last week as the conflict intensified, but renewed optimism over negotiations and continued shipping through the Red Sea helped calm the market and pull prices lower.