* European stocks rise with Wall Street index futures

* Jefferies favours tech and financial stocks

* Yen drops after recent rally, fiscal policy worries

investors

(Adds comments)

By Stefano Rebaudo

Aug 4 (Reuters) - European stocks climbed alongside U.S.

futures on Tuesday, although a rebound in oil prices underscored

market scepticism that the U.S.-Iran war would be resolved

quickly through diplomacy.

Meanwhile the yen eased, but held on to most of its

intervention-driven gains after last week's joint action by

Tokyo and Washington to support the currency.

Qatar Foreign Ministry spokesperson Majed Al Ansari said

diplomatic efforts to resolve the U.S.-Iran war were ongoing,

but an attack near the Strait of Hormuz underscored doubts that

the conflict was nearing an end.

Brent futures rose 1.5% to $85.05 a barrel after

dropping 7% in the previous session to a three-week low.

Europe's STOXX 600 .STOXX was up 0.60%, with tech stocks

rising 1.85%. Nasdaq futures climbed 0.77% and

S&P 500 futures increased 0.20%.

The S&P 500 index rose 1.48% on Monday, hitting

7,610.04, not far from its all-time high of 7,620.90, while the

Dow Industrials reached a record closing high. Nasdaq Composite

jumped 2.12%.

MSCI's main world stocks index rose 0.10%.

"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," Mohit Kumar, an

economist at Jefferies, said, recalling the recent rally in bond

yields.

"One underlying factor that continues to support our medium

term bullish view is the amount of cash in the system," he

added.

Longer-dated U.S. Treasury yields rose to a 19-year high

last week after comments from U.S. Federal Reserve Chairman

Kevin Warsh raised concerns the Fed may not act aggressively to

head off inflation.

Most analysts believe Warsh does not want to hike rates, and

the incoming data could provide him enough cover to stay put.

The first round of U.S. jobs data is due later on Tuesday.

With almost two-thirds of S&P 500 companies reporting for

the second quarter, 84% have beaten earnings estimates,

according to LSEG data and market participants.

"Market leverage is high, but a reversal requires aggressive

tightening and a yield-curve inversion," Manish Kabra, lead U.S.

equities and multi-asset strategist at Societe Generale, said,

adding that a yield-curve inversion is not SG's scenario.

SG sees the S&P index at 8,000.

However, concerns linger elsewhere for Europe, with some

economists warning that its economy faces a more challenging

outlook than other regions as drought hampers Rhine shipping and

gas inventories remain under pressure.

YEN DROPS AFTER INTERVENTION-DRIVEN RALLY

The dollar was up 0.4% at 157.80 yen, rebuilding

strength after coordinated intervention by U.S. and Japanese

authorities to prop up the yen last week.

The Japanese currency remains about 4% stronger against the

greenback compared with levels a week ago that prompted official

support and marked the first U.S. intervention in the Japanese

foreign exchange market in 15 years.

However, Japan's expansionary fiscal policy and the Bank of

Japan's gradual pace of rate hikes could weigh on the yen, some

market participants warn.

"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," Thierry Wizman, global forex and rates strategist at

Macquarie Group, said.

The U.S. dollar index, which measures the greenback

against a basket of six currencies, was steady, not far from the

lowest levels of the past two months at 99.97.