Oil prices extended their decline on Tuesday, dropping more than 3% amid reports that the US State Department intends to send evacuated diplomats back to the Middle East, signaling that Washington does not anticipate an all-out war. The development comes as supply-side concerns take a backseat to the impending "Economic D-Day" campaign against Iran.

Brent crude on the ICE exchange was last down 3.4% at $89.05 per barrel, marking its lowest level since August 13, while US West Texas Intermediate (WTI) crude fell 3.6% to approximately $81.99 per barrel. Tuesday's slide follows Monday's losses, when Brent had already dropped by 3%.

The recent weeks have seen a lull in US military strikes in the Middle East, replaced instead by mounting economic pressure on Iran. This week, the US government unveiled a comprehensive new package of sanctions against Tehran, along with penalties targeting so-called "facilitators" who continue to conduct trade with Iran. The White House has branded this initiative as "Economic D-Day," with US Treasury Secretary Scott Bessent describing it on Monday as "the largest financial offensive in history."

Meanwhile, US Defense Secretary Pete Hegseth told reporters on Monday that the United States retains the option of launching further military strikes in the Middle East. "If we need to use force, we will. If Iran recklessly crosses lines and provokes American forces, we will respond as necessary," Hegseth stated. "Right now, economic pressure is what hurts the Iranian regime the most. But that doesn't mean we rule out military action in the Strait of Hormuz or around Iran."

In response, Iranian Economy Minister Ali Madanizadeh told state television that Tehran is "fully prepared" to withstand additional US sanctions. "The government is and has been ready for this. We have a two-year plan to deal with such situations. We hold our own cards and know exactly how to play this game," Madanizadeh said.

Adding to the geopolitical landscape, China's Foreign Ministry has stated that Beijing will "take all necessary measures to resolutely safeguard its legitimate rights and interests," though specifics were not elaborated upon in the statement.