Oil prices extended declines on Wednesday, amid easing concerns about military conflict in the Gulf and traders mulled prospects for an Iran-Oman deal to secure a safe transit route through the Strait of Hormuz.

International benchmark Brent crude futures for October delivery declined 2.93% to $85.99 a barrel as of 5:39 a.m. ET. U.S. West Texas Intermediate futures for October dropped 2.78% to $80.07 per barrel.

"U.S. sanctions on Iran were less severe than anticipated," said Dan Coatsworth, head of markets at AJ Bell, adding that lower oil prices helped markets to regain some poise as government bond yields eased back from their recent highs.

Brent

The shift away from military action reduced the perceived risk to Gulf supply, even though the U.S. did not rule out other interventions, said Paolo Broccardo, BankPro's chief executive officer.

In addition, Pakistan reported meaningful progress in talks aimed at de-escalation and restoring navigation through the Strait of Hormuz, Broccardo noted.

Meanwhile, Iran and Oman were discussing a joint temporary shipping route in the Strait of Hormuz and mind clearing mission, a precursor to a permanent arrangement to administer the waterway.

"Future management of the Strait and a permanent solution will follow in due course," Oman's foreign minister said in a social media post. "Discussions with regional partners will be conducted in support of peace and cooperation, stability and freedom of navigation."

—CNBC's Spencer Kimball contributed to the report.