A proposal by Venezuela President Hugo Chavez to try to broker a peace deal in Libya briefly pushed oil lower on Thursday, while recently risk-averse stock markets put in some gains.
European markets were volatile ahead of a European Central Bank meeting that was expected to sharpen its anti-inflation line.
Early losses of around $3 a barrel in crude oil were pared back on reports of continued fighting in Libya, including air strikes against rebel positions.
Brent crude oil fell as low as $113.09 a barrel but was later back up around $116.
World stocks as measured by MSCI were up 0.2 percent.
The early moves in oil were prompted by Chavez, a good friend of Libyan leader Muammar Gaddafi, suggesting a commission from Latin America, Europe and the Middle East could be formed to try to reach a negotiated outcome to the Libyan crisis, which has driven oil prices to levels that may threaten global economic recovery.
Arab League Secretary-General Amr Moussa said the proposal a was under consideration by his group.
Some oil analysts suggested that the proposal was a convenient excuse for traders to adjust their positions.
If it's coming out of Chavez, it might not have a great degree of substance, said Tim Riddell, head of technical analysis at ANZ in Singapore.
The fact that the markets have been so volatile and without having concrete evidence of any material shift in the unrest in the Arab world suggests to me that we are at best consolidating.
Financial markets have nonetheless become highly sensitive to North Africa and Middle east tension because of the broad impact that a rising oil price has on everything from corporate profits to consumer confidence and interest rate projections.
European shares rose on Thursday buoyed by positive U.S. economic news overnight and the falling oil price.
The FTSEurofirst 300 index of leading European shares was up 0.4 percent, partially recovering the previous session's 0.7 percent fall.
Forecast-beating U.S. private sector jobs data and positive comments from the Federal Reserve in its latest Beige Book report overnight helped buoy equities in both the United States and Asia.
(There is) some hope that the global recovery is strong enough to weather any shocks that may arise due to uncertainties in the Middle East, said Zahid Mahmood, senior dealer at Capital Spreads.
The euro hovered near a four-month high against the dollar, supported by expectations that the ECB meeting will pave the way for rate rises later in the year.
Investors have pushed the euro up about 3 percent from a low hit on February 14.
The euro was slightly weaker against the dollar at $1.3851, but close to its four-month peak of $1.3890 hit on trading platform EBS on Wednesday.
Euro zone government bonds traded lower ahead of the ECB meeting.
(Additional reporting by Neal Armstrong and Simon Falush; Editing by Hugh Lawson)