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Oil prices tumbled more than five per cent Tuesday after a report said Israeli Prime Minister Benjamin Netanyahu told US President Joe Biden he would not strike Iran's crude or nuclear facilities.
Oil prices were also pushed down by worries about demand in China after Beijing failed to announce any new stimulus for its stuttering economy at a weekend briefing.
Major stock markets were mostly lower with declines in Shanghai, Hong Kong and London, while Frankfurt rose on a report showing reviving investor confidence.
A key US oil contract, West Texas Intermediate, tumbled more than five per cent to $69.71 per barrel.
European benchmark Brent North Sea crude also slumped by a similar amount to $73.34, before clawing back some losses.
Prices slid following a Washington Post report that Netanyahu had pledged to target Iran's military rather than its crude and nuclear sector.
Iran's missile attacks on Israel earlier this month sent crude prices soaring on fears that retaliatory strikes would disrupt oil supplies.
Tuesday's news has "alleviated some of that supply concern", said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
"With the geopolitical risk-premium falling, prices are once again being led by the struggling demand picture," he added.
The International Energy Agency on Tuesday said global oil markets remain "adequately" supplied.
In its monthly update, the Paris-based agency said the end of a Libyan oil blockade, weaker demand and relatively modest output losses from hurricanes in the US Gulf Coast "have helped to steady markets".
