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By Stefano Rebaudo

August 4 (Reuters) — European equities and U.S. stock futures advanced on Tuesday, even as a rebound in oil prices signaled persistent market doubt that the U.S.-Iran conflict would be swiftly settled through diplomatic channels.

The Japanese yen slipped marginally but retained the bulk of gains secured by coordinated intervention from Tokyo and Washington last week — the first such joint effort in 15 years.

Oil Recovers After Sharp Drop

Brent futures climbed 1.4% to $84.95 a barrel, recovering from a 7% plunge in the prior session that had pushed prices to a three-week low. The rebound followed conflicting signals from Washington and Tehran, compounded by a fresh attack on commercial shipping in the Strait of Hormuz — through which roughly a fifth of global daily oil consumption transits — that underscored persistent threats to global energy supply routes.

Equity Markets Advance

Europe's broad STOXX 600 index rose 0.55%, led by technology shares, which gained 1.7%. On the U.S. side, Nasdaq futures added 0.67% and S&P 500 futures ticked up 0.22%.

The gains built on Monday's rally, when the S&P 500 surged 1.48% to 7,610.04 — just shy of its record high of 7,620.90 — while the Dow Jones Industrial Average closed at an all-time peak.

MSCI's broad gauge of global equities edged up 0.05%, and Japan's Nikkei 225 advanced 0.32%.

"We are adding risk to sectors which should be less impacted by higher rates. Tech and financials would be our favourite sectors to add back risk in the portfolio," said Mohit Kumar, an economist at Jefferies, referencing the recent run-up in bond yields.

"One underlying factor that continues to support our medium-term bullish view is the amount of cash in the system," Kumar added.

Treasury Yields and Fed Outlook

Longer-dated U.S. Treasury yields touched a 19-year high last week following remarks from Federal Reserve Chairman Kevin Warsh that stoked concerns the central bank may not move forcefully to curb inflation. Market participants largely interpret Warsh as reluctant to raise rates further, and suggest upcoming economic data could give him sufficient justification to hold steady. The first batch of U.S. employment figures is scheduled for release later on Tuesday.

Nearly two-thirds of S&P 500 companies have now reported second-quarter results, with 84% surpassing earnings expectations, according to LSEG data — comfortably above the long-term average of roughly 76%.

"The AI capex boom remains intact," Eastspring Investments analysts, including Chief Investment Officer Vis Nayar, wrote in a research note.

In Europe, however, some economists cautioned that the region faces a tougher outlook than other major economies, as drought conditions disrupt shipping along the Rhine River — a critical freight artery for European industrial goods, chemicals, and commodities — and natural gas inventories remain under strain.

Yen Rally Loses Momentum

The dollar firmed 0.4% against the yen to trade at 157.80, regaining ground after last week's coordinated currency intervention by U.S. and Japanese authorities. Despite the pullback, the yen remains roughly 4% stronger versus the dollar compared with the levels that triggered the official response — the first U.S. intervention in Japan's foreign exchange market in 15 years.

Still, market participants expressed concern that Japan's expansionary fiscal stance and the Bank of Japan's measured approach to interest-rate increases could undermine the currency over time, as the wide interest-rate gap between Japan and the U.S. continues to incentivize yen selling.

"The catalysts that can amplify the unwinding of short yen positions (supporting the currency) are, potentially, lower crude oil prices, BoJ policy tightening in September and thereafter, and some moderation in Prime Minister Sanae Takaichi's fiscal plans, in order to bring debt sustainability back," said Thierry Wizman, global forex and rates strategist at Macquarie Group.

The U.S. dollar index, which tracks the greenback against a basket of six currencies, held steady near its lowest levels in two months at 99.98.

(Reporting by Stefano Rebaudo and Gregor Stuart Hunter; Editing by Shri Navaratnam and Jamie Freed)