Volkswacht Bodensee - Oil prices fall on easing Middle East fears

Crude prices were also pulled lower by worries about demand in China after Beijing failed to announce any new stimulus for its stuttering economy at a weekend briefing.

Major stock markets diverged with declines in Shanghai, Hong Kong and London, while Frankfurt rose on a report showing reviving investor confidence.

In New York, the Dow was lower and the other main indexes little changed after the market hit record highs Monday.

Key US oil contract West Texas Intermediate fell more than five percent to below $70 a barrel before clawing back some of the losses. It was last down 4.6 percent at $70.41.

European benchmark Brent North Sea crude slumped by a similar amount.

Iran's missile attacks on Israel earlier this month sent crude prices soaring on fears that retaliatory strikes would disrupt oil supplies.

But Tuesday's news of Netanyahu's assurances has "alleviated some of that supply concern", said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

"With the geopolitical risk-premium falling, prices are once again being led by the struggling demand picture," he added.

The International Energy Agency said global oil markets remain "adequately" supplied thanks to the end of a Libyan oil blockade, weaker demand and relatively modest output losses from hurricanes in the US Gulf Coast.

- China woes -

Adding to downward pressure on oil prices is concern that China, the world's largest importer of crude, is failing to reignite its ailing economy.

Investors have been left disappointed by lack of detail from China's finance minister Lan Fo'an over the size and scale of stimulus measures to jumpstart the world's second-largest economy.

"Everywhere you look, China is in desperate need for fiscal support, with very weak domestic demand alongside an economy facing deflationary pressures and softer global demand," said Rodrigo Catril, a senior strategist at National Australia Bank.

Those Chinese concerns weighed on the region's stock market, with Hong Kong closing down nearly four percent Tuesday and Shanghai shedding 2.5 percent.

There were record closes for the Dow and the S&P 500 on Wall Street Monday. The Dow was down slightly Tuesday, but the S&P and Nasdaq Composite were largely holding onto their gains as trading got underway.

Goldman Sachs said before the market opened that third-quarter profit jumped almost 50 percent. Its shares were up almost two percent.

Goldman's profits followed positive third-quarter reports from JPMorgan Chase and Bank of America.

The strong earnings reports are "a welcome addition to the usual commentary which has been based around inflation and unemployment data", said David Morrison, analyst at Trade Nation.

London was lower mid-afternoon despite official data showing that Britain's unemployment and wage growth had eased, boosting analyst expectations that the Bank of England would resume cutting interest rates next month.

Paris stocks dropped but Frankfurt was higher after a survey showed that German investor confidence rose more than expected in October as the prospect of lower interest rates provided a glimmer of hope to businesses in Europe's largest economy.

In Stockholm, Ericsson shares were up almost nine percent after the Swedish telecoms giant said it returned to profit in the third quarter.

- Key figures around 1340 GMT -

West Texas Intermediate: DOWN 4.6 percent at $70.41 per barrel

Brent North Sea Crude: DOWN 4.3 percent at $74.14 per barrel

New York - Dow: DOWN 0.5 percent at 42,835.21 points

New York - S&P 500: UP 0.1 percent at 5,865.58 points

New York - Nasdaq Composite: UP 0.2 percent at 18,548.50 points

London - FTSE 100: DOWN 0.4 percent at 8,261.23

Paris - CAC 40: DOWN 0.8 percent at 7,539.58

Frankfurt - DAX: UP 0.3 percent at 19,564.87

Hong Kong - Hang Seng Index: DOWN 3.7 percent at 20,318.79 (close)

Shanghai - Composite: DOWN 2.5 percent at 3,201.29 (close)

Tokyo - Nikkei 225: UP 0.8 percent at 39,910.55 (close)

Euro/dollar: UP at $1.0914 from $1.0911 on Monday

Pound/dollar: UP at $1.3096 from $1.3060

Dollar/yen: DOWN at 149.18 yen from 149.74 yen

Euro/pound: DOWN at 83.34 pence from 83.51 pence

A.Ammann--VB