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Oil edged down in early trade on Tuesday after Israel-Hamas ceasefire talks in Cairo helped quell market fears of an expanded conflict in the Middle East, while worries about the outlook for U.S. interest rates weighed on the market.

Brent crude futures dipped 5 cents, or 0.06%, to $88.35 a barrel at 0006 GMT, and U.S. West Texas Intermediate crude futures slipped 12 cents, or 0.15%, to $82.51 a barrel.

The front-month contract of both benchmarks lost more than 1% on Monday.

Hamas negotiators left Cairo late on Monday to consult with the group's leadership after talks with Qatari and Egyptian mediators on a response to a phased truce proposal that Israel presented on the weekend.

The delegation was expected to report back within two days, two Egyptian security sources said.

While Hamas leaders visited Cairo, Israeli airstrikes killed dozens of Palestinians on Monday, with more than half the dead in the southern Gaza city of Rafah, which foreign leaders have urged Israel not to invade.

Continued attacks by Yemen's Houthis on maritime traffic south of the key Suez Canal trading route have kept a floor under oil prices and could prompt higher risk premiums if players anticipate crude supply disruptions.

Houthis targeted two U.S. destroyers and the vessel Cyclades in the Red Sea as well as the MSC Orion in the Indian Ocean, the Iran-aligned group's military spokesman Yahya Sarea said in a televised speech early on Tuesday.

On the economic front, investors are on watch this week for the U.S. Federal Reserve's May 1 policy review, with stubborn inflation pushing out market expectations for any rate cuts, which could bolster the U.S. dollar and hamper oil demand.

Some investors are cautiously pricing a higher probability that the Fed could hike interest rates by a quarter percentage point this year and next as inflation and the labor market remain resilient.