European shares closed higher on Tuesday, bouncing back from Monday's losses. However, investors remained cautious due to ongoing tensions in Iraq.
European markets
Wall Street gains
The pan-European FTSEurofirst 300 closed provisionally 0.3 percent higher at 1,387.53 points, with all major country bourses and most sectors posting moderate gains.
The U.K. benchmark FTSE 100 closed unofficially up 0.1 percent. The German DAX and French CAC ended respectively 0.4 percent and 0.5 percent higher.
Shares of U.K.-listed drugmaker Shire closed around 3.5 percent higher after speculation that it could be on the receiving end of a takeover bid. The company has hired investment bank Citi for any such eventuality, according to Reuters.
Meanwhile, shares of Whitbread closed roughly 2.2 percent higher after the U.K. hotel and coffee shop owner reported strong demand in its first-quarter trading update.
Iraq weighs
Concerns over tensions in Iraq continued, however. Islamist militants took control of another town on Monday, with the help of allied Sunni tribesmen. Government army officials also reported fighting south of Baghdad.
Read MoreUS considers air strikes on Iraq, holds talks with Iran
The U.S. is reportedly considering air strikes to support the Iraqi army forces. It has ruled out any coordinated military action with Iran, but the two nations have held talks to stabilize the region, according to Reuters.
Also on Tuesday, the French government urged General Electric and Siemens to come up with better offers for the power assets of Alstom.
Read MoreSiemens, Mitsubishi mull $12.3B offer for Alstom
On the data front, the widely watched ZEW economic indicator index for Germany failed to meet market expectations. The index came in at 29.8 for June, against an estimate of 35.0.
Meanwhile, official figures showed U.K. inflation slipped to 1.5 percent year-on-year in May, its lowest since October 2009.
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