U.S. President Donald Trump said there was an "all-day negotiation" on Tuesday with Iran, characterizing the talks positively while also threatening to hit Iran "really hard" if a deal with Tehran was not reached.
But Tehran denied that peace talks were under way.
"There still is some scepticism in the market about who is negotiating with whom and what the agreement may ultimately mean for shipping," said Andrew Lipow, president of Lipow Oil Associates, noting, however, that the market remains optimistic about the prospects of reopening of the strait.
Reports about progress in efforts to end the war drove prices down 5% on Tuesday, with Brent closing below $80 a barrel for the first time since July 13.
"The main sticking point appears to be whether Iran will continue to insist on a degree of control over the waterway, and whether the U.S. will stand its ground and refuse that outcome," IG analysts said in a note.
A build in U.S. crude inventories as refineries eased their processing slightly pressured prices, as did a slight rise in imports.
Crude stockpiles rose by 2.5 million barrels to 407 million barrels last week, data from the Energy Information Administration showed on Wednesday. Analysts had expected a 1.5-million-barrel draw.
The losses were limited as shipping risks in the Red Sea after Yemen's Iran-aligned Houthi rebels said on Wednesday they had attacked a Saudi oil tanker off Yanbu, a key port for Saudi crude oil exports on the Red Sea.
A surge in attacks on Russian and Ukrainian ships, ports and export terminals in the Black Sea is disrupting global supplies of grain and oil, turning the region into the latest strategic trade chokepoint to be hit by escalating conflict.
The Caspian Pipeline Consortium has repeatedly suspended operations this week because of safety concerns and a lack of tankers, numerous trading sources said, as the main export route for Kazakh crude oil struggles to recover from drone attacks.
Elsewhere, China further relaxed controls on fuel exports in August.
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