UK's blue-chip index set a record high on Monday as a falling pound boosted corporate valuations. In the US, markets opened higher with Big Tech earnings in view.
Investors are concerned that a worsening conflict in the Middle East could disrupt oil supplies.
The Nasdaq composite sank 2%. Traders are now largely forecasting just one or two cuts to rates this year, according to data from CME Group, down from expectations for six or more at the start of the year.