European stock markets rebounded and oil prices tumbled Tuesday on hopes that Ukraine and Russia would avoid a full-blown conflict.

Russia has pulled back some of its forces near the Ukrainian border, seen as a de-escalation in Moscow's crisis with the West.

The Kremlin however stressed Russia would continue to move troops across the country as it saw fit.

"First signs that Russia may be pulling back from the brink of war is being greeted with a tentative sigh of relief by investors, with some sectors making small strides of recovery," noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

London's benchmark FTSE 100 index was up 0.7 percent approaching the half-way stage.

In the eurozone, Frankfurt rose 1.8 percent and Paris gained 1.7 percent.

Europe's main stock markets had closed down about 2.0 percent Monday on fears that Russia would soon invade neighbouring Ukraine.

Oil prices, which have shot to seven-year highs on the Ukraine crisis, tumbled more than three percent in value Tuesday. 

Western powers have drawn up a series of tough sanctions against Moscow in the event of an invasion but there is a big worry that such a move would have economic consequences since the two countries are key sources of vital commodities including oil, gas and wheat.

The price of each of them has soared in recent weeks.

Talks between Russian President Vladimir Putin and German Chancellor Olaf Scholz began in Moscow Tuesday, the latest meeting in weeks of diplomatic efforts to defuse tensions over Ukraine.

"There is a certain relief in the Ukraine-Russia crisis as the two sides seem willing to continue their diplomatic efforts to avoid a military action," noted Swissquote senior analyst Ipek Ozkardeskaya.

Equities had been in turmoil after US national security advisor Jake Sullivan last week warned that Russia could storm into Ukraine "any day now", having amassed more than 100,000 troops on its border in recent weeks.

"The geopolitical risks still remain elevated as Russian troops remain at the Ukrainian border, but the risk of military conflict happening this week appears to have eased," said Edward Moya, analyst at Oanda trading group. 

In earlier Asian stock market trading, Tokyo retreated as investors brushed off data showing Japan's economy rebounded in the final three months of 2021.