Oil prices have recorded their worst three-day performance in over six years, driven by growing signs of easing tensions in the Middle East, with both the United States and Iran continuing to avoid launching attacks.

Brent crude has fallen approximately 16% over the past three trading sessions, closing near $84 per barrel on Tuesday. This marks the first time the global benchmark has experienced such a sharp three-day decline since April 2020, when fears of an oil supply glut dominated the market.

West Texas Intermediate (WTI) settled near $79 per barrel.

Factors Driving the Decline

A meeting between US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu in Washington has paved the way for further diplomatic efforts, with markets betting that peace negotiations could make progress. Trump previously told reporters on Air Force One that talks with Iran have a "good chance" of yielding results.

"Today's market action is driven by expectations of a 'Memorandum of Understanding 2.0' or a broader framework for de-escalation between Iran and the Gulf Cooperation Council," said Rebecca Babin, Senior Energy Trader at CIBC Private Wealth Group.

Earlier on Tuesday, observable vessel traffic through the Strait of Hormuz remained limited, though some ships appeared to have transited the strait with their transponders turned off.

Oil prices have been highly volatile this month, and traders remain cautious as tanker traffic through the Strait of Hormuz has not yet returned to normal. September-delivery Brent crude fell 4.8%, settling at $84.09 per barrel, while September-delivery WTI dropped 4.1%, closing at $79.26 per barrel.