Source: Sharecast
The Stoxx Europe 600 index ended the day 0.2% higher at 642.10, with all major indices across the continent finishing with mild gains.
Stocks had initially fallen on the back of rising oil prices as the US launched a third straight night of strikes on Iran and President Donald Trump threatened a levy on shipping transiting the Strait of Hormuz. The price of Brent crude was up 2.1% at $85.08 a barrel.
Investors spooked by the spectre of inflation caused by Trump's behaviour started to increase bets on the European Central Bank hiking interest rates by 25 basis points at least once more and as early as September.
However, figures out from the Bureau of Labor Statistics before the close of play in Europe showed that the annual rate of US consumer price inflation dropped sharply last month to 3.5% from the three-year high of 4.2% in May. Analysts had expected a milder slowdown to 3.8%.
"Today's softer inflation data has all but ruled out a July Fed rate hike, boosting equities and strengthening the case for policymakers to keep interest rates on hold over the summer months," said Axel Rudolph, chief technical analyst at IG.
In equity news, Swedish tech industry equipment maker Mycronic surged after second-quarter sales beat estimates.
Ericsson shares fell 13% after the Swedish telecoms equipment specialist posted below-forecast quarterly sales and flagged rising cost inflation. Adjusted EBIT fell 7% year-on-year while revenues slipped 6%.
Oil stocks across the continent performed well as crude prices hit a one-month high, including BP, Shell, Repsol and TotalEnergies, while travel peers Deutsche Lufthansa, Air France-KLM and IAG were flying lower on fuel cost concerns.