European stocks closed about half per cent firmer yesterday as record crude prices boosted heavyweight oil firms and BHP Billiton sparked gains for miners after winning a $3.2 billion Chinese iron ore deal.
Elsewhere, stocks were mixed as oil soared above $50 a barrel, fuelling fears that corporate profits may suffer from tighter margins and a slowdown in global economic growth.
Data showing a surprise fall in US consumer confidence initially dented sentiment but stocks rebounded to close near their session highs.
The FTSE Eurotop 300 index of pan-European blue chips closed 0.5 per cent higher at 990.4 points, erasing most of Monday's losses.
Turnover was solid at around €2.4 billion and stocks to rise outnumbered those that fell by about two to one.
The narrower DJ Euro Stoxx 50 index rose 0.3 per cent to 2,733.7 points.
"The market is looking surprisingly resilient today, but it's one day, and to become more positive longer-term, one has to take the view that oil is going to go lower," said Gareth Evans, a European equities strategist at ING Barings. "At the moment, it has momentum."
US light crude hit a peak of $50.47 a barrel, the highest in the 21-year history of trading on the New York Mercantile Exchange, after rebels in Nigeria warned oil companies to halt production in the Niger delta before they declare an all-out-war on October 1.
A pledge by Saudi Arabia to boost its official production capacity by 500,000 barrels per day to 11 million bpd did little to calm oil prices, which hovered around $50 a barrel.
"Institutional investors at least don't seem to be starting to panic. There is still some appetite for risk," said Michael O'Sullivan, a strategist at State Street Global Advisers.
Expectations of prolonged high crude prices feeding profits for oil majors buoyed energy stocks, with BP closing 1.4 per cent higher, Total up 0.4 per cent and Eni 1.4 per cent firmer.
ING Barings' Evans said he remained overweight oil stocks. "Clearly the temptation arises from time to time to cut (exposure) and certainly our preference, when that time comes, would be for the bank sector," Evans said.
Bank stocks were largely steady yesterday, with basic resources the standout sector as BHP Billiton jumped 5.2 per cent after securing its Chinese supply contract.
Fellow miners also rose, with Antofagasta, Rio Tinto and Anglo American all up between two and four per cent.
On the downside, shares in Italy's Banca Fideuram dropped 4.7 per cent, a day after a second senior executive quit the company in just over two weeks. Sanpaolo IMI, which controls Fideuram, was down 1.8 per cent.
Swiss reinsuer Converium tumbled 13 per cent as investors approved a $423 million capital increase which the firm said it needs to stay in business.
In New York, the blue-chip Dow Jones industrial average was 0.5 per cent firmer at 10,041.2 points, while the Nasdaq Composite Index rose 0.3 per cent to 1,864.8 points by 1615 GMT.