Tokyo extended gains and Europe's main indices were solidly higher nearing the half-way stage, as traders digested an expected pickup to Britain's Consumer Prices Index.

"After UK inflation data this morning, all eyes turn to US CPI due out later today, which could provide some clues into whether the Fed will begin cutting rates in September," noted Victoria Scholar, head of investment at traders Interactive Investor.

"Analysts anticipate US annual inflation (for July) will come in at around three percent, in line with June's reading, potentially prompting the central bank to loosen monetary policy next month.

"This would likely provide some relief to the markets after last week's fears of a US recession sparked a major bout of volatility," Scholar added.

Data on Tuesday showed US wholesale prices rose less than forecast last month.

Monetary policymakers are tipped to cut US rates by 25 basis points at their September meeting, with some observers eyeing as much as 50, followed by at least one more cut before December.

"With the prospects of an imminent Fed easing cycle, key US data releases are taking centre stage and ahead of the US CPI release," said Rodrigo Catril at National Australia Bank.

Wall Street ended sharply higher Tuesday, with the Nasdaq jumping more than two percent on a rally in tech titans including Amazon, Nvidia and Apple, which sank earlier this month on worries their surge this year may have been overdone.

Oil prices extended losses, even as tensions continue to rise in the Middle East on fears Iran will retaliate against Israel after top leaders of Hezbollah and Hamas were assassinated in Tehran and Beirut in late July.

US President Joe Biden said Tuesday that a ceasefire deal in Gaza could deter Iran from launching an attack.

Luca Santos, at ACY Securities, said there were several reasons behind crude's current price movements.

He pointed to increased supplies, the United States tapping its strategic reserves and hopes that a full-blown conflict can be avoided.

Santos warned, however, that "any significant escalation could shake up oil supplies, leading to sharp price hikes and a return of risk-averse behaviour in the markets".