By Deep Kaushik Vakil

(Reuters) -Oil prices slipped on Tuesday after a short-lived boost from stronger economic data out of Europe as the market weighed the potential fallout from any fresh U.S. sanctions on Iran’s oil exports.

Global benchmark futures were down 51 cents or 0.6% at $86.49 a barrel by 1141 GMT, while U.S. West Texas Intermediate crude futures fell 56 cents or 0.7% to $81.34.

Both benchmarks had jumped $1 earlier after data showed that overall business activity in the eurozone expanded at its fastest pace in nearly a year this month, led by a buoyant recovery in the bloc’s dominant service industry.

Meanwhile, EU foreign ministers agreed in principle on Monday to expand sanctions on Iran following Tehran’s missile and drone attack on Israel this month.

The U.S. Senate will begin considering a foreign aid package that includes sanctions on Iran’s oil exports that target ships, ports, and refineries that process Iranian oil.

“In a sober market, not drunk on the ‘what ifs’ of a direct war between Israel and Iran, sanctions would almost be tolerable,” said John Evans at oil broker PVM, citing OPEC+ spare capacity and the fact that China imports nearly all of Iran’s crude.

Moreover, Iran and Israel going beyond symbolic attacks “risks the ire of a U.S. that right now has its own political reasons for letting Iranian oil get to water,” Evans added.

Investors this week are waiting for the release of U.S. gross domestic product figures and March personal consumption expenditure data – the Fed’s preferred inflation gauge – to assess the trajectory of monetary policy.

{{8849|U.S. crcrude oil inventories are expected to have increased last week while refined product stockpiles likely fell, a preliminary Reuters poll of analysts showed.