Meanwhile, Trump prevents Israel from attacking Iran's energy assets: File Image/Pixabay

Oil on Tuesday extended its losses, this time by about 5 percent, as an unusually optimistic market continued to think peace between the U.S. and Iran was possible as a suspension of military strikes between the two countries continued.

As of 1601 GMT, Brent fell $4.61, or 5.2 percent, to $83.75 per barrel, and ‌West Texas Intermediate fell $4.06, or 4.9 percent, to $78.55; both benchmarks dropped about 17 percent over three days.

Doves were mollified on Tuesday when Israel Katz, Israel’s defense minister, told media that U.S. president Donald Trump was preventing his country from striking energy targets in Iran.

Katz said, “The United States is not approving it at the moment because of the concern that Iran would attack neighbouring countries, causing a global oil crisis…..as far as we’re concerned, we’re prepared to set [Iran] back 40 years.”

Positive sentiment – at least as far as oil investors were concerned – was also generated by a Gulf source and a Western diplomat telling media that Oman had presented Iran with a plan backed by Gulf states to manage the Strait of Hormuz, including collecting voluntary fees for its usage.

Adding to the optimism was Trump himself, who reported "good talks" underway with Iran; however, the Islamic republic denied seeking to resume talks with the U.S.

Goldman Sachs stated in a note on Tuesday that if the Hormuz fully reopens by the final three months of this year, Brent should hover around the $80 per barrel mark by year-end; “But Red Sea disruptions and attacks on Saudi oil infrastructure may pose a new source of upside risk for crude and refined products prices.”

In other oil news, a weekend attack by the Iran-backed Houthis damaged Saudi Aramco’s 400,000barrel per day Jazan refinery, causing it to close and repairs tentatively expected to be completed mid-August.

The Houthis also struck Aramco facilities in Yanbu, prompting Oilprice.co, market analyst Juianne Geiger to note that “A Houthi strike on Yanbu suggests the war may now be following the workaround west” – a reference to Saudi Arabia relying on the Red Sea port to move crude around the Hormuz.