LONDON: Stock markets made gains and oil prices steadied Tuesday as investors tracked developments in the war in Ukraine and digested the US Federal Reserve chief's warning of a possible sharp interest rate hike.

Crude futures had soared more than seven percent Monday on supply worries as European leaders debated banning imports from Russia, but they were more or less flat in Tuesday trading.

Despite the economic and political fallout from the Ukraine conflict Wall Street was up around 0.7 percent mid session. Main European markets finished in the green, Frankfurt, Paris and Milan all adding one percent while London was half a percent to the good at the close.

"(The) market seems to be shrugging off the inflation story and hawkish Fed," said Neil Wilson, chief market analyst at Markets.com.

But he added: "I don't think this is a 'risk on' rally" as there are "signs of stagflation everywhere you look, an environment lending itself to bear markets."

For Fawad Razaqzada, market analyst with ThinkMarkets, "the drop in oil and gold prices and gains for European stocks all point to optimism about a potential ceasefire and hopefully end of the conflict in Ukraine."

As traders kept a keen eye on Ukraine developments, the Kremlin on Tuesday said it would like negotiations with Kyiv aimed at ending Russia's military action to have more substance.

The two sides are holding negotiations remotely after several rounds of talks on the border between Belarus and Ukraine which yielded little progress.

Ukrainian President Volodymyr Zelensky renewed an offer of direct peace talks with Russian counterpart Vladimir Putin late Monday.

Chris Beauchamp, chief market analyst at online trading platform IGA, found that "equities have found the strength to move higher once more... equities are moving higher again, buoyed by (Federal Reserve Chair Jerome Powell's confident outlook" Monday indicating sufficient rate rises to contain inflation.

"Of course, if Powell's optimism is misplaced then the reckoning will be unpleasant, but for now stock markets are still content to move higher," Beauchamp added.

Some EU states want to ramp up pressure on Russia with energy sanctions, though others, including Germany -- hugely reliant on Moscow's fuel -- have been reluctant to target the key sector.

Adding to the price pressure, Saudi Arabia warned that Yemeni rebel attacks on its oil facilities pse a "direct threat" to global supplies, after Red Sea facilities belonging to giant Saudi Aramco were targeted.

Soaring oil prices have been a driver of turmoil on world markets in recent weeks as demand surges also as economies reopen from pandemic lockdowns.

That, along with a spike in the cost of other key commodities, such as metals and wheat on the Ukraine conflict, has sent global inflation rocketing and caused central banks to hike interest rates fearing a period of stagflation whereby prices soar but growth stalls.

In Asia, Hong Kong's main stocks index ended sharply higher, resuming last week's rally sparked by China's pledge to support the country's markets and indicated a tech crackdown was nearing an end.