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 largely fell, with New York giving up gains from Monday when the market hit record highs.

Key US oil contract West Texas Intermediate fell more than five percent to below $70 a barrel at one stage but recovered to $70.06

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

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

But reports of Netanyahu's assurances "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 is concern that China, the world's largest crude importer, 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 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 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 largely held onto their gains as trading started.

Goldman Sachs said before the market opened that third-quarter profit jumped almost 50 percent, and Bank of America and Citigroup also reported strong results.

Goldman was up more than two percent before giving up most of those gains, while Bank of America gained 1.8 percent and Citi was up 1.5 percent.

But the overall indexes were pulled lower by disappointing guidance from UnitedHealth Group, which fell more than 6 percent, and by chipmaker giant Nvidia which fell more than 4 percent on profit taking after a recent rally.

London closed lower despite official data showing that Britain's unemployment and wage growth had eased, boosting analyst expectations that the Bank of England would resume interest rate cuts next month.

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

Shares in Dutch tech giant ASML tumbled more than 14 percent in Amsterdam after an apparent leak of its third quarter results showing far lower order inflows than expected.

- Key figures around 1540 GMT -

West Texas Intermediate: DOWN 5.1 percent at $70.06 per barrel

Brent North Sea Crude: DOWN 4.8 percent at $74.74 per barrel

New York - Dow: DOWN 0.2 percent at 42,969.30 points

New York - S&P 500: DOWN 0.3 percent at 5,845.20 points

New York - Nasdaq Composite: DOWN 0.6 percent at 18,388.31 points

London - FTSE 100: DOWN 0.5 percent at 8,249.28 (close)

Paris - CAC 40: DOWN 1.1 percent at 7,521.97 (close)

Frankfurt - DAX: DOWN 0.1 percent at 19,486.19 (close)

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: DOWN at $1.0906 from $1.0911 on Monday

Pound/dollar: UP at $1.3094 from $1.3060

Dollar/yen: DOWN at 149.25 yen from 149.74 yen

Euro/pound: DOWN at 83.31 pence from 83.51 pence

dan-ajb/gv/tw

Dow

S&P Global Ratings

NATIONAL AUSTRALIA BANK

BANK OF AMERICA

INDEX CORP.