By Rob Verdonck and Salma El Wardany

(Bloomberg) -- Oil slipped in thin trading in Asia, as traders await the second round of talks in Geneva between the US and OPEC member Iran later on Tuesday.

Brent fell toward $68 a barrel, after adding 1.3% on Monday, while West Texas Intermediate held above $63. Traded volumes remained below average, with the US and Canada closed for holidays on Monday, and many markets in Asia celebrating the Lunar New Year this week.

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Developments in the Middle East have put geopolitical risk back into focus, with Tehran’s naval drills near a key shipping route heightening tensions before talks with the US. Iran’s Revolutionary Guard is conducting exercises in the “region of” the Strait of Hormuz, the vital waterway through which about a fifth of the world’s oil flows, the nation’s semi-official Tasnim news agency said.

Meanwhile, Iranian Foreign Minister Abbas Araghchi has held talks with the head of the United Nations’ atomic watchdog, and discussed proposals he’ll present at indirect talks with US Special Envoy Steve Witkoff on Tuesday, according to Iranian state TV. US Secretary of State Marco Rubio said he’s “hopeful” Tehran and Washington can overcome years of tense confrontation and hostility and eventually broker an agreement.

Negotiations are also scheduled between Russia and Ukraine in Geneva over the next two days. However, the prospects of a speedy end to the almost four-year-old conflict and the return of Russian barrels look slim.

“The market remains unsettled by geopolitical uncertainties,” ANZ Group Holdings Ltd. analysts Brian Martin and Daniel Hynes said in a note. “If tension in the Middle East eases or meaningful progress is made on the Ukraine war, the risk premium currently built into oil prices could swiftly unwind.”

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