Oil prices tumbled to a three-week low, driven by growing optimism that the United States and Iran are nearing a deal to reopen the Strait of Hormuz. Brent crude fell 5.3% to settle around $79 per barrel, its lowest level since July 10.

Market sentiment suggests that a potential interim agreement between Washington and Tehran could restore normal commercial shipping through the strategic waterway and prevent further escalation of the conflict. Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, noted that "the market has been repricing risk based on expectations of a recovery in crude transport, rather than focusing on the specific conditions needed to achieve that goal."

Mike Sommers, CEO of the American Petroleum Institute, said in an interview on Tuesday that roughly 7 million barrels of crude oil are currently being transported daily through the Strait of Hormuz. This figure is significantly below pre-war levels.

Sources familiar with the diplomatic situation indicate that Iran is considering allowing European countries to participate in mine-clearing operations in the Strait of Hormuz, marking a notable softening of Tehran's earlier stance that foreign involvement in such operations was unacceptable. U.S. Treasury Secretary Bessent said on Tuesday that an agreement to reopen the Strait of Hormuz could be reached "today or tomorrow."

Several technical factors amplified the decline in oil prices. According to data from Bridgeton Research Group, a unit of Kpler, trend-following commodity trading advisors have reduced their long positions in Brent crude to 36%, down from 73% at the start of trading on Tuesday.

West Texas Intermediate (WTI) for September delivery fell 5.7% to settle at $75.77 per barrel, while Brent crude for October delivery dropped 5.3% to settle at $79.36 per barrel.