On Monday, markets weighed aggressive rhetoric out of Tehran and Washington against more conciliatory statements that at times moderated the oil market.

"We have received messages - without going into details - but the main point is that the diplomatic apparatus has been active in recent days and ideas have been conveyed to us by certain mediators," Iranian foreign ministry spokesman Esmaeil Baghaei told a news conference in Tehran.

Oil markets were also pressured by uncertainty over Saudi oil supplies.

Saudi Arabia has been able to continue exporting millions of barrels of oil a day despite the Hormuz blockade -- although far below its prewar totals - via its Red Sea port of Yanbu.

Oil markets have for months feared that the Houthis would return to attacking shipping in the Red Sea and Gulf of Aden, as they did during the Gaza war, potentially cutting off yet more crude from global markets.

The Houthis, who have been at war with Riyadh for over a decade, have not said how they will enforce their blockade.

Elsewhere, The British pound dipped against the dollar as Andy Burnham took over as Britain's prime minister, naming former defence secretary John Healey as finance minister in an unexpected appointment.

London's blue-chip FTSE 100 shed 0.7 per cent as investors faced down "a renewed oil shock, rising shipping fears around the Strait of Hormuz and uncertainty over the policy direction of Britain’s new prime minister," said Patrick Munnelly at Tickmill.