LONDON/SINGAPORE - Markets kept a close eye on the widening conflict in the Middle East and the likely pace of Federal Reserve rate cuts after strong US jobs data on Friday.

European shares fell. The continent-wide Stoxx 600 index was down 0.9 percent, while Germany's DAX was 0.8 percent lower and Britain's FTSE 100 fell 1.3 percent.

Europe was also taking a lead from a 1 percent drop in US shares on Monday, driven by a fall in tech companies as angst about Fed rate cuts and the Middle East took a toll. Futures for the US S&P 500 index were slightly higher on Tuesday, pointing to a muted open.

Oil prices pared some of their gains after jumping on Monday due to the widening conflict in the Middle East as well as concerns about supply disruptions due to storms in the United States.

Brent crude futures were last down 1.9 percent at $79.41 a barrel, having surged above $80 a barrel for the first time in more than a month in the previous session.

Yields on benchmark 10-year US government bonds hovered above the 4 percent level after rising over the last two sessions in the wake of Friday's surprisingly strong US jobs report.

Traders are now pricing in a roughly 10 percent chance the Fed could hold rates next month and see around 50 basis points of cuts over the rest of the year.

The dollar was on the back foot, falling 0.27 percent against the Japanese yen to 147.78, while the euro was up 0.1 percent at $1.0985.