Oil prices dropped sharply after Qatar said mediators were making progress towards ending the conflict between the United States and Iran, raising hopes of reopening the Strait of Hormuz.

Brent crude fell by more than five per cent as investors reacted to prospects of a deal, although the strait remains largely closed following reports that another vessel was attacked while attempting to cross.

Qatar said its Emir discussed efforts with US President Donald Trump to reduce tensions, while Iran maintained that no direct talks with Washington are ongoing.