Oil surrendered hefty gains as investors expressed optimism that Iran appeared less likely to launch retaliatory attacks against the United States in a way that could disrupt crude oil supplies from the Middle East.

Brent crude futures fell 54 cents to $68.37 a barrel, having been as high as $70.74 on Monday, while US crude dropped 44 cents to $62.83. It is currently trading about $4 less than its Monday high.

Gold also retreated to $1,557.54 an ounce, after scaling a near seven-year peak of $1,579.72 overnight.

"There's a growing sense that the possibility of Iran's retaliation is weaker than what was originally thought," Stephen Innes, Asia Pacific market analyst at AxiTrader told Al Jazeera. "I personally don't think Iran has the financial capacity to respond by attacking oil assets and in fact, higher oil prices would be good for the US economy now."

On the other hand, lower oil prices spell good news for most Asian countries, which are net importers of oil, Innes said.

As such, shares across Asia recovered on Tuesday as MSCI's broadest index of Asia-Pacific shares outside Japan added 0.6 percent, recouping almost all of Monday's losses.

Japan's Nikkei rallied 1.3 percent and Shanghai blue chips advanced 0.5 percent. E-Mini futures for the S&P 500 firmed 0.1 percent, while European equities futures rose 0.4 percent.

Shares had fallen sharply on Monday as Iran and the US traded threats after an US air attack killed a top Iranian commander.

The mood calmed a little as the session passed with no new aggression.

Instead there was confusion over a letter written by a senior US military general to Iraq on Monday saying it would pull out of the country.

Following media reports of the letter, US Defense Secretary Mark Esper told Pentagon reporters that no decision had been made, and the military said the letter was only a poorly worded draft.

Wall Street chose to hope for the best and the Dow rose 0.24 percent, while the S&P 500 gained 0.35 percent and the Nasdaq 0.56 percent.

Surveys of service sectors out overnight showed an improvement in the US, UK and European Union, stirring speculation the closely-watched ISM measure of US services due later on Tuesday will also show strength.

"We think the longest US expansion on record still has plenty of legs," Tom Porcelli, chief US economist at RBC Capital Markets, told Reuters. "To be sure, Iran adds an additional layer of complexity."

"But while the risk of conflict has increased, the reality is this is likely to be limited to proxy skirmishes," he argued. "The risk of a "hot" conflict seems low as Iran is unlikely to respond in such a way that risks a significant escalation from the United States."

The calmer mood saw the yen lose much of its safe-haven gains, with the US dollar bouncing to 108.42 yen from a low of 107.75 on Monday.

The euro edged up to $1.1195, but faces stiff chart resistance about $1.1240, while sterling made gains to $1.3172 on better economic data at home.

Against a basket of currencies, the US dollar had drifted off to 97.645 but stayed above the recent six-month trough of 96.355.