Oil prices fell on Tuesday, easing for a second day, as market participants weighed the possibility of a de-escalation in US-Iran tensions, while a firmer dollar placed greater downside pressure on prices.

Brent crude futures fell 34 cents, or 0.5 per cent, to $65.96 per barrel by 06:23 GMT, while US West Texas Intermediate crude was at $61.81 a barrel, down 32 cents, or 0.5pc.

Oil prices fell more than 4pc on Monday after US President Donald Trump said Iran was “seriously talking” with Washington, signaling a de-escalation of tensions with the Opec member.

Iran and the US are expected to resume nuclear talks on Friday in Turkey, officials from both sides told Reuters on Monday, and Trump warned that with big US warships heading to Iran, bad things could happen if a deal was not reached.

Talks with the US should be pursued to secure Iran’s national interests as long as “threats and unreasonable expectations” are avoided, Iranian President Masoud Pezeshkian posted on X on Tuesday.

“The volatile price actions of oil seen in the last four weeks have been driven by the geopolitical risk premium factor that is linked to the current US administration’s expansionary foreign policy, especially the ‘on-off’ threats towards Iran,” said OANDA senior market analyst Kelvin Wong.

Weighing on prices further, the US dollar index hovered near its highest in more than a week. A stronger greenback hurts demand for dollar-denominated crude from foreign buyers.

“The continued recovery in the US dollar yesterday, following President Trump’s nomination of Kevin Warsh as the next Federal Reserve chair, also exerted downward pressure on oil prices,” ING analysts said in a note.

On the trade front, Trump on Monday unveiled a deal with India that slashes US tariffs on Indian goods to 18pc from 50pc in exchange for India halting Russian oil purchases and lowering trade barriers.

“Overnight, the US and India agreed on a trade deal … if we do see this happen, it will only lead to a further increase in the amount of Russian oil floating at sea,” the ING analysts said.

Trump announced the deal on social media following a call with Indian Prime Minister Narendra Modi, noting that India had agreed to buy oil from the US and possibly Venezuela.

Some analysts said they were expecting volatile price movements this month.

“Looking ahead into February, prices are likely to remain choppy and range-bound … (they) are expected to stay highly reactive to headlines and macro cues rather than a decisive trend, with risk skewed to the downside,” said Phillip Nova’s senior market analyst Priyanka Sachdeva.