At around 0030 GMT, a barrel of Brent crude was down 5.92 percent at $98.30. Benchmark US oil contract, West Texas Intermediate, was down 5.01 percent at $87.72.

In Asia markets, Japan's Nikkei index and South Korea's Kospi were up by more than three percent.

Trump sent a peace plan to Iran as he voiced optimism Tuesday at ending nearly a month of a war, with Tehran announcing that it will let "non-hostile" oil vessels go through the crucial Strait of Hormuz.

The tentative signs of a diplomatic solution came despite new violence, with an Iranian missile causing injuries in Israel which in turn pressed on multiple fronts and vowed to seize control of a strip of southern Lebanon.

The fall in oil Wednesday came after prices jumped a day earlier, with traders turned cautious over the prospect of a negotiated agreement to end the war.