Hopes that the Greek government will pass a crucial confidence vote later Tuesday, paving the way for the debt-stricken country to get vital short-term loans, helped lift the mood in world markets.
Should Greek Prime Minister George Papandreou get the requisite parliamentary support for his new Cabinet, the expectation is that he will be able to muster enough votes for another austerity package next week, which will clear the way for Greece to get its next euro12 billion ($17 billion) bailout loan from the eurozone and the International Monetary Fund.
Getting that money should tide Greece over for a few months. Without the money, it would likely default on its debts, potentially triggering another panic in financial markets similar to the one that ensued after the collapse of U.S. investment bank Lehman Brothers in 2008.
A default could spark a financial maelstrom around the world, dragging down Greek and European banks as well as stoking renewed fears over the public finances of other euro countries, such as Portugal, Ireland and Spain.
"Indications over the last 24 hours or so have certainly been that the government will survive, if only because the alternative would be so dire," said Beat Siegenthaler, an analyst at UBS.
That expectation helped shore up stocks Tuesday, particularly in Europe, despite figures showing investor confidence in Germany running at a two-and-a-half year low.
In Europe, the FTSE 100 index of leading British shares was up 1.1 percent at 5,758, while Germany's DAX rose 1.5 percent to 7,256. The CAC-40 in France was 1.8 percent higher at 3,868.
Meanwhile, the euro was up 0.2 percent at $1.4373.
In the U.S., the Dow Jones industrial average was up 0.6 percent at 12,151, while the broader Standard & Poor's 500 index rose 0.9 percent at 1,290.
Longer term, the markets appear to speculate that some sort of Greek debt restructuring will have to take place. Many analysts cite the sheer size of Greece's debt, its slow growth and unstable politics as a toxic combination that will likely result in some form of renegotiation of the public debt.
Earlier in Asia, a number of key indexes were higher by 1 percent or more. Japan's Nikkei 225 gained 1.1 percent to close at 9,459.66, a day after the government upgraded its economic assessment for the first time in four months, as the world's No. 3 economy continued to battle back from the devastating earthquake and tsunami on March 11.
Hong Kong's Hang Seng gained 1.2 percent to 21,850.59, while South Korea's Kospi added 1.4 percent to 2,048.17. Shanghai's main index also ended 1 percent higher at 2,646.48.
The more positive tone in markets was evident in oil prices too, which have lately taken a battering on concerns over the global economy and the Greek debt crisis. Benchmark oil for July delivery was up $1.05 to $94.68 barrel in electronic trading on the New York Mercantile Exchange.
Pamela Sampson in Bangkok contributed to this report.