Stock markets saw sold gains on Tuesday, bouncing back from a heavy bout of selling the previous day, as Russian President Vladimir Putin quelled fears of immediate conflict in Ukraine.
Putin, speaking at a press conference in Moscow on Tuesday, said there was "no need yet" for Russia to exercise its authority, adding that he was not considering the annexation of Crimea and any force used would be a last resort. He also directly addressed Monday's heavy selling in stock markets saying that the move would only be "temporary."
Late on Tuesday, Ukrainian Prime Minister Arseny Yatseniuk said that his government and the Russian administration had begun high-level contacts on the crisis.
Russia's MICEX Index closed higher on Tuesday, surging 5.26 percent, having lost nearly $60 billion in market capitalization on Monday, ending the session down 11 percent - its worst fall in five years.
(Read our live blog: Ukraine crisis: Latest news and market reaction)
Heavily weighted Russian stocks claw backed Monday's losses with MegaFon closing higher by 2.3 percent, with both Gazprom and VTB Bank climbing roughly 8 percent.
Ukrainian stocks also gained with Kiev's UAX Index rising 9 percent. European indexes followed suit, with Germany's DAX, France's CAC and the U.K.'s FTSE all closing around 2 percent higher.
On the pan-European Euro Stoxx 600, stocks with heavy exposure to Russia like Carlsberg, Societe Generale and Austria's Raiffeisen Bank all closed higher after talk of economic sanctions for Russia had curbed sentiment in the previous session.
U.S. stocks jumped on Tuesday, with the Dow and S&P 500 bouncing back after their worst hit in a month.
Timothy Ash, the head of emerging market research at Standard Bank said that Putin's words constituted a turnaround by the Russian president.
"This looks, feels and smells like a Putin climb-down, if there is such a thing. He took this right to the edge, but ultimately was probably struck by the unified western response and the threat of western economic sanctions," he said in a research note. "In the end Putin's bluff was called, and he blinked first, well let's hope."
(Read more: Russian markets hit as Putin tightens grip on Crimea)
U.S. Secretary of State John Kerry arrived in Kiev on Tuesday and announced an economic package and technical assistance for Ukraine in a show of support for its new government.
Kerry told a televised news conference that the United States "extended its deepest condolences" to Ukrainians who took to the streets to demand freedom and were met by sniper fire. "We condemn the Russian Federation's act of aggression," Kerry said.
Oil fell more than $1 on Tuesday to below $110 a barrel and gold prices - often seen as a safe haven during times of geopolitical instability - also fell 1 percent on Tuesday, retreating from Monday's four-month high.
April Brent crude was down nearly $2 near $109 a barrel. It closed the previous session at its highest since Dec. 27. U.S. crude for April delivery fell by more than a percent after reaching a 5-1/2 month high at $105.22 on Monday.
"Markets are making hay – stocks are rallying and clawing back yesterday's losses as the situation stabilizes," Kathleen Brooks, research director at Forex.com said in a research note. "Putin is still trying to save some face after this situation dramatically back-fired on him."
Monday's selling began with Russia's military advance into Ukraine over the weekend, which prompted world leaders to call for sanctions on Moscow, including measures targeting banks and officials. President Obama said the U.S. was examining economic and diplomatic steps to isolate Moscow, and he called on Congress to expedite assistance for Ukraine.
(Read more: Could Ukraine trigger a full-blown EM crisis?)
Asian equities were a mixed sight on Tuesday as shares, in particular Tokyo and Sydney, clawed back losses.
Strategists in Asia overnight told CNBC that market instability would only be short term, suggesting that stocks were oversold. They believed that Ukraine would have a fleeting impact on global markets as the country accounts for just 0.2 percent of global gross domestic product (GDP).
(Read more: Volatile Ukraine may now face default risk)
"Let's keep things in perspective. Ukraine had a 2012 GDP of $176 billion. Its economy is smaller than Greece, Portugal, or Ireland. It is smaller than the Czech Republic, Algeria, or Peru. So the direct impact on the global economy, even if Ukraine descended into civil war, would be minimal," said Patrick Chovanec, managing director at Silvercrest Asset Management.
Credit ratings agency Standard & Poor's last week lowered Ukraine's long-term rating from 'CCC ' to 'CCC' saying the political crisis had put the country's ability to service its debt at risk and raised uncertainty over Russia providing promised aid.
—By CNBC's Ansuya Harjani. Follow her on Twitter @Ansuya_H