Oil prices jump, stocks drop as Mideast war flares

World oil prices climbed Tuesday, once more closing in on $100 a barrel, and stock markets mostly retreated owing to a flare-up in the Middle East war.

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

"Japan's Nikkei is the worst performing global (stocks) index... as a rising yen is bad news for Japanese exporters," said Kathleen Brooks, research director at XTB.

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

Wall Street's main stock indices were lower after traders returned from a three-day holiday weekend.

"Investors were spooked by the continued rise in oil prices amid the escalation of hostilities between the US and Iran," said Trade Nation analyst David Morrison.

The price of Brent crude, the benchmark international contract, rose to $99.46 a barrel before retreating.

Rising oil prices are adding pressure on the US Federal Reserve, 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 operations being halted 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.

Traders are closely watching the greenback and how it reacts to US inflation data due Friday, which could lock higher rates from the Federal Reserve this month.

"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, shares in pharmaceutical giant Novartis slumped more than 10 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.

Brent North Sea Crude: UP 0.9 percent at $97.90 per barrel

West Texas Intermediate: UP 1.6 percent at $92.92 per barrel

New York - Dow: DOWN 1.0 percent at 52,894.71 points

New York - S&P 500: DOWN 0.3 percent at 7,695.89

New York - Nasdaq Composite: DOWN less than 0.1 percent at 26,493.92

London - FTSE 100: DOWN 0.1 percent at 10,811.66 (close)

Paris - CAC 40: UP 0.1 percent at 8,317.98 (close)

Frankfurt - DAX: FLAT at 26,007.63 (close)

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)

Dollar/yen: DOWN at 154.18 yen from 154.24 yen on Monday

Euro/dollar: DOWN at $1.1631 from $1.1632

Pound/dollar: UP at $1.3548 from $1.3544

Euro/pound: DOWN at 85.86 pence from 85.90 pence