The pan-European Stoxx 600 climbed 1.4%, the Dax in Germany added 1.3%, and the FTSE 100 in the U.K. rose 1.6%. The CAC 40 in France was the laggard, rising 0.5%

European stocks were higher in afternoon trading on Thursday, erasing earlier losses, as oil prices pulled back from a sharp spike and the European Central Bank kept interest rates unchanged.

The pan-European Stoxx 600 climbed 1.4%, the Dax in Germany added 1.3%, and the FTSE 100 in the U.K. rose 1.6%. The CAC 40 in France was the laggard, rising 0.5%.

Brent crude futures, the global oil benchmark, turned lower after having soared more than $125 a barrel in overnight trading.

With the spectre of renewed strikes in the Middle East and elevated oil prices looming, the European Central Bank and Bank of England both unveiled interest rate decisions.

The European Central Bank left interest rates unchanged as anticipated on Thursday, but warned of intensifying risks from rising inflation and slowing economic growth stemming from an energy shock caused by the Iran war.

Leaving its key deposit rate steady at 2%, the ECB said that incoming data has been “broadly consistent” with its previous assessment of the inflation outlook.

However, policymakers flagged that the fighting in the Middle East has led to a sharp rise in oil and gas costs, “pushing up inflation and weighing on economic sentiment.”

The implications of the war for medium-term inflation and economic activity will depend on the intensity and duration of the energy price shock and the scale of its indirect and second-round effects, the ECB said in a statement.

Elsewhere, the Bank of England has voted to leave its key bank rate unchanged at 3.75%, but flagged that policy may need to respond later this year to an energy shock stemming from the Iran war.

In a statement, the BOE said its rate-setting Monetary Policy Committee voted by a majority of 8-1 to keep rates steady, with one member backing a quarter-point hike.

Officials at the central bank warned that while the “prospects for global energy prices are highly uncertain,” monetary policy will be adjusted to help achieve the central bank’s 2% inflation target sustainably.

The policy stance required to achieve this will depend on the scale and duration of the shock, and how it propagates through the economy, the BOE wrote.