European shares edged higher on Tuesday, driven by strength in energy stocks as ongoing uncertainty in the Middle East helped keep oil prices elevated. The pan-European STOXX 600 rose 0.1% to 661.39 points as of 0717 GMT, reflecting a cautious market mood.
Rising energy prices provided support to oil and gas companies, with the energy sector jumping 1% as oil reached its highest level so far this month. That advance came even as investors weighed the possibility that a prolonged disruption near the Strait of Hormuz could exacerbate inflationary pressure and complicate prospects for monetary easing.
Geopolitical rhetoric added to the market backdrop. U.S. President Donald Trump on Monday replied to Iran's conditions for a peace deal by issuing his own demands, which included compensation for people killed in wars, attacks and protests - a rhetorical escalation that could further complicate efforts to reopen the vital oil shipping route.
The market response was mixed across sectors. Travel and leisure shares slipped 0.7%, a move the market linked to renewed worries over higher fuel costs. Technology stocks posted a 0.4% gain, while overall corporate newsflow was light as the European earnings season drew to a close.
Investors are closely watching data due later this week for fresh clues on growth, inflation and the likely path of interest rates. Scheduled releases include euro zone employment figures and U.S. consumer price index data, with euro zone GDP also slated for publication.
Among early movers on Tuesday, Alcon was a notable outperformer, jumping 5.7% after the Swiss-American eye-care group raised its full-year earnings forecast.
With energy markets remaining sensitive to developments in the Middle East and key macroeconomic releases approaching, investors appear to be balancing the lift from higher oil prices against the risks that supply disruptions and rising fuel costs pose for inflation and broader economic momentum.