Oil markets dropped on Tuesday as the latest escalation in the Sino-U.S. trade war clouded the outlook for demand, although concerns over tightening supply offered prices some support.

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U.S. President Donald Trump on Monday said he would impose 10 percent U.S. tariffs on about $200 billion worth of Chinese imports.

U.S. Treasury Secretary Steven Mnuchin last week invited top Chinese officials to a new round of talks on the dispute, but thus far nothing has been scheduled.

"The growing trade dispute has hurt trading sentiment. The impact on economic growth is slowly dripping in, which again hurts oil prices," Wang Xiao, head of crude research at Guotai Junan Futures, said on Tuesday.

But supporting crude futures were potential supply cuts from U.S. sanctions on Iran. Sanctions affecting Iran`s petroleum sector will come into force from Nov. 4.

Iranian crude oil export loadings have declined by 580,000 barrels per day in the past three months, Bank of America Merrill Lynch analysts said in a note to clients.

Meanwhile, oil output from seven major U.S. shale formations is expected to rise by 79,000 barrels per day to 7.6 million bpd in October, the U.S. Energy Information Administration said Monday.

Elsewhere, Russia`s energy minister, Alexander Novak, said on Monday that the country was ready to discuss cooperation with the United States to balance the oil market.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)