World shares and US futures decline, while oil prices press higher

Currency traders observed a decline in world shares and U.S. futures on Tuesday amid escalating conflict in the Middle East, which drove oil prices upward. The Houthi attacks on oil facilities and utilities in Saudi Arabia's southern region have reignited fighting between Saudi Arabia, a key U.S. ally, and Iranian-backed rebels in Yemen.

Early European trading saw the DAX in Germany dip 0.3% to 25,922.44 and the CAC 40 in Paris fall 0.2% to 8,291.43; Britain's FTSE 100 remained nearly flat at 10,824.32. The S&P 500 futures slipped 0.2%, while the Dow Jones Industrial Average declined 0.7%. Tokyo's Nikkei 225, however, lost early momentum, falling 1.7% to 65,269.33 as major exporters faced selling due to the yen's appreciation.

Toyota Motor Corp. shares dropped 4.1%, while Panasonic Holdings Corp. fell 5.8%. The U.S. dollar weakened to 153.86 Japanese yen from 154.34 yen earlier in the day, reflecting expectations of U.S. and Japanese interventions to prevent the yen's further decline. Last week, the dollar briefly reached around 160 yen. The government revealed that the economy expanded at a slightly faster pace in the April-June quarter than initially reported, at an annualized rate of 1.4%, up from the previous estimate of 1.1%.

This revision is attributed to stronger business investment, despite overall investment contracting at a rate of minus 0.9%. "The surge in consumption from policy measures seen in April-May is fading, and supply-side-driven inflation will accelerate as firms pass on increased costs, eroding consumers' purchasing power," commented Norihiro Yamaguchi of Oxford Economics in a commentary.