London's FTSE 100 ended Tuesday's trading session higher, recovering from early losses after softer-than-expected US inflation data boosted investor confidence and eased concerns over interest rate policy.

The blue-chip index gained 31.10 points (0.3%) to close at 10,529.39, while the FTSE 250 and AIM All-Share Index also posted modest gains. Markets initially opened lower as escalating tensions in the Middle East pushed oil prices sharply higher, raising fears of renewed inflationary pressure.

Investor sentiment improved after the latest figures from the US Bureau of Labor Statistics showed consumer prices fell 0.4% in June from the previous month, a larger decline than economists had expected. Annual inflation also slowed to 3.5%, strengthening expectations that the US Federal Reserve may keep interest rates unchanged in the near term.

The inflation data weakened the US dollar and pushed Treasury yields lower, with investors reducing expectations of further interest rate increases. Analysts said the figures provide the Federal Reserve with greater flexibility as it evaluates future monetary policy.

Despite geopolitical concerns, energy stocks benefited from the sharp rise in crude oil prices. Brent crude climbed to around $84 per barrel after renewed tensions involving Iran and the Strait of Hormuz disrupted market sentiment. Shares of major energy companies including BP and Shell advanced as higher oil prices supported earnings expectations.

Mining stocks also gained on stronger metals prices, helping lift the broader FTSE index. Meanwhile, several UK companies delivered mixed corporate updates, with Pearson among the day's biggest fallers after receiving a broker downgrade, while Genus rose after forecasting annual profits above market expectations.

Across Europe, major stock markets in Paris and Frankfurt finished slightly higher, while US markets also traded in positive territory following better-than-expected earnings from several major banks and the encouraging inflation report.

Market attention now turns to upcoming economic data from China, Canada's interest rate decision, and the US Federal Reserve's Beige Book, all of which could influence global market sentiment in the coming days.