A look at the day ahead in European and global markets from Rae Wee

Oil prices were back on the rise on Tuesday and touched their highest this month, as Washington and Tehran continued to trade demands for the reopening of the Strait of Hormuz.

U.S. President Donald Trump responded to Iran's conditions for a peace deal with his own demands that Iran pay compensation for people killed in wars, attacks and protests, dimming prospects for an imminent deal to reopen the key waterway.

Since the war began in February, Trump has swung repeatedly between threats of escalation and claims that a peace deal is nearing, leaving investors increasingly weary.

Stocks drifted in Asia, as continued tensions in the Middle East and prolonged uncertainty over the global inflation outlook sapped market sentiment, though key will be Wednesday's U.S. inflation data, which will provide clues on the Federal Reserve's next rate move.

Overnight, Cleveland Federal Reserve Bank President Beth Hammack said she feels the time is now to start raising interest rates gradually, so as to avoid needing to raise rates more sharply later.

The data calendar for the day ahead is light, so the focus will be on developments in the Middle East.

On the U.S. earnings front, CoreWeave is expected to report a sharp jump in second-quarter revenue as the company sees a surge in demand for its AI cloud services amid massive data centre spending by tech companies, with investors focused on the outlook and investment plans for the year.

Speaking of AI, Nvidia said on Monday it has partnered with six major financial institutions to launch compute financing platforms aimed at raising more than $500 billion in third-party capital for AI infrastructure, underscoring the scale of the sector's investment boom.

And over in foreign exchange land, the yen was back in the spotlight as the Japanese currency stood on the weaker side of 159 against the dollar, giving up some of its intervention gains.

Key developments that could influence markets on Tuesday:

- Developments in the Middle East

- U.S. earnings including CoreWeave, Super Micro Computer

- Reopening of 5-year German government debt auction

(Editing by Kate Mayberry)