To update prices and add the source

NEW DELHI, Feb 17 (Reuters) - Brent crude prices fell in Asian trading on Tuesday as investors assessed the risk of supply disruptions after Iran conducted naval drills near the Strait of Hormuz ahead of nuclear talks with the United States later in the day.

Brent crude futures fell 59 cents, or 0.86 percent, to $68.06 a barrel by 0738 GMT, after rising 1.3 percent on Monday.

U.S. West Texas Intermediate crude rose 32 cents, or 0.51 percent, to $63.21 a barrel, but this price movement includes all of Monday's moves since settlement prices were not released yesterday due to the U.S. Presidents' Day holiday.

Many markets are closed today, Tuesday, for the Lunar New Year holiday in several countries, including mainland China, Hong Kong, Taiwan, South Korea, and Singapore.

US President Donald Trump said on Monday that he would participate "indirectly" in the talks to be held in Geneva, adding that he believed Tehran wanted to reach an agreement.

“Market confidence is closely tied to the tone and progress of these negotiations… keeping the geopolitical risk premium on prices,” said Sugandha Sachdeva, founder of New Delhi-based research firm SS Wealth Street.

Sachdeva suggested that oil prices would remain highly volatile in both directions due to diplomatic signals rather than fundamental supply and demand factors.

Iran began military exercises on Monday in the Strait of Hormuz, a vital international waterway and oil export route for the Gulf Arab states, which have long called for diplomacy to end the dispute.

Iran, along with other OPEC member countries, namely Saudi Arabia, the United Arab Emirates, Kuwait and Iraq, exports most of its crude oil through the Strait, primarily to Asia.

Meanwhile, Citi said that if Russian supply disruptions continue to keep Brent crude in the $65-$70-per-barrel range in the coming months, the OPEC+ alliance is likely to respond by increasing production from spare capacity.

Three OPEC+ sources said the alliance is leaning toward resuming increased oil production from April, as the group prepares for peak summer demand and rising prices due to tensions between the United States and Iran.