San Francisco Frontiers - Stocks diverge as traders eye US-Iran ceasefire

Oil prices pulled back but held on to most of Monday's sharp gains, after the two sides traded fire as they vie for control of the crucial Strait of Hormuz.

London's FTSE 100 index fell one percent as traders returned from the UK bank holiday.

The index was weighed by a sharp drop to the share price of banking giant HSBC, whose first-quarter earnings missed expectations as profits were hit by a surprise $400 million fraud-related charge and economic risks from the Middle East crisis.

Markets fared better elsewhere in Europe, with Paris up 0.5 percent and Frankfurt advancing more than one percent in midday deals.

Italian bank Unicredit jumped around six percent in Milan after it reported a sharp rise in first-quarter net profit.

"First-quarter corporate earnings have largely been robust so far which has helped to sustain global equities despite the uncertain backdrop," said AJ Bell head of markets Dan Coatsworth.

"However, the longer the situation goes on without any sign of a lasting resolution, the harder it will be for investors to remain positive," he added.

International oil benchmark Brent North Sea fell around one percent to about $113 per barrel after sharp gains the previous day.

Crude prices surged Monday after the US military said it hit six Iranian boats threatening commercial shipping and its forces repelled missile and drones.

The United Arab Emirates, meanwhile, said it was targeted by Iranian strikes, including one on its vital Fujairah energy hub.

"Global market sentiment has made a cautious start to the week, with renewed attacks in the Gulf casting doubt on the state of the four-week-old ceasefire," said Jim Reid, managing director at Deutsche Bank.

Fears that the ceasefire could fall apart weighed on Asian equities, with Hong Kong, Singapore, Mumbai, Bangkok, Manila and Wellington all down.

Sydney also retreated as the Australian central bank hiked interest rates for the third straight meeting, citing rising energy prices.

Tokyo and Shanghai were closed for holidays.

The losses followed a drop on Wall Street -- where the S&P 500 and Nasdaq came off record highs -- and came after a healthy rally fuelled by fresh interest in all things linked to artificial intelligence.

- Key figures at around 1100 GMT -

Brent North Sea Crude: DOWN 0.9 percent to $113.37 a barrel

West Texas Intermediate: DOWN 1.7 percent at $104.61 a barrel

London - FTSE 100: DOWN 1.1 percent at 10,246.21 points

Paris - CAC 40: UP 0.5 percent at 8,019.70

Frankfurt - DAX: UP 1.3 percent at 24,293.55

Hong Kong - Hang Seng Index: DOWN 0.8 percent at 25,898.61 (close)

Tokyo - Nikkei 225: Closed for a holiday

Shanghai - Composite: Closed for a holiday

New York - Dow: DOWN 1.1 percent at 48,941.90 (close)

Dollar/yen: UP at 157.70 yen from 157.08 yen on Monday

Euro/dollar: DOWN at $1.1687 from $1.1701

Pound/dollar: DOWN at $1.3536 from $1.3538

Euro/pound: DOWN at 86.33 pence from 86.41 pence

J.Martinez--SFF