Oil prices increased on Tuesday following U.S. President Donald Trump's heightened threats toward Iran, as the two countries engaged in talks in Geneva regarding the Islamic Republic's nuclear program.

West Texas Intermediate jumped 1.5 percent per barrel, while international benchmark Brent North Sea crude edged higher, The Caspian Post reports, citing foreign media.

"There's speculation that Iran could agree to dilute its most highly enriched uranium in exchange for the full lifting of financial sanctions, but it's not clear if that will be enough to seal a deal between the two parties," noted Aarin Chiekrie, analyst at Hargreaves Lansdown.

Iran and the United States began fresh talks as Trump warned of consequences should Tehran fail to strike a deal.

The US president has repeatedly threatened to intervene militarily against Iran, first over the Islamic republic's deadly crackdown on protesters last month and then more recently over its nuclear programme.

Elsewhere on markets, European stocks steadied in early afternoon deals after Tokyo closed lower, with Chinese markets shut for the Lunar New Year.

Wall Street reopens Tuesday after a US public holiday.

"US stock futures are trading lower as AI-related fears continue to weigh on sentiment," Chiekrie said.

"Insurance brokers, wealth advisors, real estate services, and logistics were all in the firing line last week, and investors are cautiously watching for what slice of the market could be next on the AI hit list," he added.

In foreign exchange, the dollar rose against the British pound as official data showed UK unemployment rising to a five-year high.

Analysts said the reading of 5.2 percent for the final quarter of last year increased the likelihood of the Bank of England cutting its benchmark interest rate next month.

The greenback was also higher versus the euro but fell against the yen.

Europe's biggest economy Germany is unlikely to rebound in 2026 as geopolitical uncertainty, high costs and weak domestic demand weigh on growth, the country's Chamber of Industry and Commerce said Tuesday.

Germany returned to weak growth in 2025 after two years of recession.