Oil fell Thursday as traders assessed potential supply disruptions following attacks on ships passing through the Strait of Hormuz, while digesting the International Energy Agency's latest monthly report on the outlook of the oil market.

Futures for international benchmark Brent crude for December delivery dropped 1.66% to $104.31 a barrel. U.S. West Texas Intermediate futures for November fell 1.09% to $94.05 per barrel.

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A Singapore registered ship was sunk in the critical Strait of Hormuz, which raised worries of a prolonged Mideast conflict. "Such attacks are unprovoked, unjustifiable and a breach of international law," the Singapore maritime authority said in a statement Wednesday.

Iran, meanwhile, has said it is "counting the moments" until it can start striking U.S. warships.

The International Energy Agency in its oil report for October out Wednesday cautioned that constraints on diesel markets could continue well into the next year, with fresh attacks on Saudi Arabia threatening to derail a recovery in oil supply.

To help ease prices, the Trump administration is considering to ease sanctions on "shadow fleet" vessels which transports ​oil and petroleum products from countries such as Russia, Reuters reported.

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The lack of progress between U.S.-Iran diplomatic track "leaves little immediate prospect of a full reopening of the waterway," said Firas Bechwaty, head of business development at online trading platform ICM late Wednesday.

"At the same time, Saudi crude continues to reach international buyers through alternative routes, while accelerated emergency stock releases by IEA members provide an additional buffer, preventing a sharp rise in prices, even as tensions remain elevated," Bechwaty noted.