The FTSE 100 closed up 0.5% after gaining as much as 1.5% in late afternoon trading, with energy stocks <.FTNMX0530>, which have shed about a third in value this year, jumping 7.8%.
Major players BP and Royal Dutch Shell gained 6% and 9%, respectively, after U.S. President Donald Trump said he expects Russia and Saudi Arabia to announce a major oil output cut, signalling willingness by both countries to end their oil price war. [O/R]
A 25% surge in oil prices dispelled gloom in markets after data showed U.S. claims for unemployment benefits shot to a record high of more than 6 million last week amid tighter stay-at-home measures to curb the coronavirus pandemic.
"The doubling of jobless claims will fill investors with a sense of unease about the outlook," said Seema Shah, chief strategist at Principal Global Investors. "With lockdowns becoming stricter and being extended, we should anticipate further surges in jobless claims over the coming weeks."
In Britain, a survey conducted between March 9 and March 22 showed more than a quarter of UK companies reduced staff levels in the short term.
IAG-owned British Airways struck a deal with its union to suspend thousands of staff in one of the airline industry's most dramatic moves. Separately, IAG cancelled its final dividend.
The FTSE 100 concluded its worst quarterly performance since 1987 on Tuesday as the fast-spreading pandemic forced lockdown in most parts of the world, bringing economic activity to a near standstill.
Analysts are predicting a 21.9% decline in earnings for companies listed on the pan-European STOXX 600 in the second quarter, according to Refinitiv data.
Gains on FTSE 100 were also limited by falls in shares of Standard Life Aberdeen, Phoenix Group Holdings and Smith & Nephew as they traded ex-dividend.
Cruise operator Carnival Corp dropped 22.3% to the bottom of the index, as it raised $6.25 billion by issuing new debt and equity, borrowing at a high cost to weather the economic storm from the pandemic.
The domestically focused midcaps fell 0.8%, with food producer Bakkavor Group sliding 19.3% after it revealed that the outbreak led to a cut in orders and suspended dividend.
Recruiter Hays dropped 13.3% after it announced an emergency 200 million-pound issue of shares as it sought to prop up its finances.
By Sruthi Shankar and Devik Jain