Il Nuovo Postiglione - Oil prices jump, stocks drop as Mideast war flares

The yen spiked as investors ramped up bets on the Bank of Japan hiking interest rates, which dragged down stocks in Tokyo.

"The rise in the oil price has spooked markets, and European equities are lower, along with US equity futures," said Kathleen Brooks, research director at XTB.

"Japan's Nikkei is the worst performing global (stocks) index... as a rising yen is bad news for Japanese exporters," she added.

Wall Street reopens Tuesday after a long holiday weekend, with futures contracts indicating a mixed performance.

The yen on Tuesday briefly hit 152.89 against the dollar, within distance of the 152.10 touched in February. It later traded at above 154 yen to the dollar.

Traders are closely watching the greenback and how it reacts to US inflation data due Friday, which could lock in an interest-rate hike from the Federal Reserve this month.

Rising oil prices are adding pressure on the US central bank, with average diesel prices in the world's biggest economy hitting a record high Monday, according to the motorists' association AAA.

Fresh attacks by Yemen's Iran-backed Houthi rebels on Saudi Arabia led to the halting of operations at several energy facilities in the kingdom, overshadowing Tehran's remarks that it was nearing a deal with Oman over shipping through the Strait of Hormuz.

"The market is staring down a Fed hike, a live inflation debate, oil near triple digits, the risk of further Japanese tightening... (and) renewed tariff threats against Canada" by the US, said analyst Stephen Innes at Quintex Intel.

President Donald Trump on Monday threatened to block US sales of Canadian plane manufacturer Bombardier, alleging "unjust and unfair" bilateral trade provisions as he escalates a tariff war between the neighbouring countries.

Canada's retaliatory tariffs on billions of dollars in US products meanwhile took effect Tuesday.

On the corporate front Tuesday, the share price of pharmaceutical giant Novartis slumped more than nine percent after the Swiss group said trial results to treat a neurological disease failed to meet expectations.

French AI firm Mistral meanwhile saw its value jump to 21 billion euros ($24 billion) after it raised three billion euros in what it called the largest-ever European tech fundraising.

Elsewhere, a global AI buildout that has fuelled demand for China's technology products sent its exports surging in August, official data showed.

- Key figures at around 1100 GMT -

Brent North Sea Crude: UP 1.7 percent at $98.64 per barrel

West Texas Intermediate: UP 2.7 percent at $93.90 per barrel

London - FTSE 100: DOWN 0.1 percent at 10,814.09 points

Paris - CAC 40: DOWN 0.1 percent at 8,294.87

Frankfurt - DAX: DOWN 0.2 percent at 25,947.87

Tokyo - Nikkei 225: DOWN 1.7 percent at 66,269.33 (close)

Hong Kong - Hang Seng Index: DOWN 0.4 percent at 25,317.18 (close)

Shanghai - Composite: UP 0.2 percent at 3,940.55 (close)

New York - Dow: Closed for a public holiday

Dollar/yen: UP at 154.28 yen from 154.24 yen on Monday

Euro/dollar: DOWN at $1.1611 from $1.1632

Pound/dollar: DOWN at $1.3526 from $1.3544

Euro/pound: DOWN at 85.87 pence from 85.90 pence

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I.Altadonna--INP