LONDON, May 27 - Oil prices fell by more than three per cent on Wednesday as traders weighed up progress in the United States (US)-Iran peace talks and renewed hostilities.
Brent crude futures fell US$3.11, or 3.12 per cent, to US$96.47 a barrel as of 0913 GMT, while U.S. West Texas Intermediate crude lost US$3.64, or 3.88 per cent, to US$90.25 a barrel.
The losses almost erased Brent's gains on Tuesday.
"There has been palpable progress towards ending the crisis, and an increasing number of ships are transiting the critical chokepoint. This is why the downward pressure has resumed," PVM analyst Tamas Varga said of Wednesday's losses.
July Brent futures rose 3.6 per cent in the previous session after the US carried out new strikes in Iran, hurting hopes over the weekend that Washington and Tehran would reach a peace deal.
"Hopes for a framework agreement between the US and Iran to end the conflict have been somewhat dampened by the recent US strikes on Iranian missile sites and vessels that were allegedly attempting to lay mines in the Strait of Hormuz.
"Nevertheless, confidence remains high among market participants," Commerzbank analysts said on Wednesday.
On Tuesday, Iran said that the US had violated a ceasefire by striking targets near the contested Strait of Hormuz, while Washington said its strikes were defensive in nature.
Israel ramped up bombing in Lebanon on Tuesday, further straining peace efforts.
After an April ceasefire in the three-month-long conflict, both sides indicated they had made progress on talks toward reopening the Strait, which is key to global oil and gas flows.
Nevertheless, news that some liquefied natural gas tankers have passed through the Strait in recent days lifted expectations that the waterway might reopen soon, which would add to global supply.
