The pan-European STOXX 600 <.STOXX> index reversed early losses to rise 0.1 percent, its highest closing level since August 9.
Stronger crude prices boosted oil and gas stocks <.SXEP> up 0.9 percent, while retailers <.SXRP> shot higher, sealing their best daily gains in five months after a strong update from Britain's Next (>> Next) provided relief in the disrupted sector.
Britain's FTSE <.FTSE> fell 1.1 percent, weighed by sterling shooting higher when the Bank of England said it would likely raise rates in the coming months.
Investors have been fretting over the impact of central bank tightening on stock markets, with Societe Generale strategists cutting their allocation to equities to neutral on Thursday.
"Valuations can be sustained as long as interest rates and bond yields are low, but if these start to rise that will put pressure on the equity market," said Christopher Peel, chief investment officer at Tavistock Wealth.
Germany's DAX <.GDAXI> fell 0.1 percent.
European stocks turned positive after inflation figures from the U.S. overshot expectations, boosting stocks with high exposure to the dollar such as autos <.SXAP>.
Strategists at Morgan Stanley and Goldman Sachs have said European stocks with high dollar exposure are highly oversold and undervalued, and a modest rise in the greenback could boost them significantly.
"You could do worse than looking for companies with big U.S. exposure," said Morgan Stanley's Graham Secker.
Shares in Fiat Chrysler (>> Fiat Chrysler Automobiles), which has two-thirds of revenues denominated in dollars, were among top gainers.
Leading the STOXX was Next (>> Next), up 13 percent after the British clothing retailer nudged its full-year sales and profit guidance higher.
Munich Re (>> Muenchener Rueckversicherung) rose 0.1 percent as investors shrugged off news the German firm could miss its profit target this year due to losses from hurricanes Harvey and Irma.
Baader Helvea analysts cut their earning forecasts for the company but kept their 'hold' rating, citing attractive valuations and expectations that policy prices could stabilise.
"Munich Re is well positioned to weather the storm and seize potential opportunities given the very strong balance sheet," they said in a note.
Switzerland's biggest life insurer Swiss Life (>> Swiss Life Holding) fell 1.4 percent on worries over a possible fine in the United States after the company said it was contacted by the Department of Justice about whether it helped U.S. clients avoid tax.
Hermes (>> Hermès International) fell 2.1 percent after the French luxury goods maker struck a note of caution over the impact of the euro's strength, which overshadowed a record first half operating margin.
CEO Axel Dumas said there could be a negative impact from a stronger euro on 2018 profits.
Miners <.SXPP> were the biggest weight as investors digested a decline in industrial metals and disappointing data from top consumer China.
Shares in London-listed heavyweight miners Rio Tinto (>> Rio Tinto), Glencore (>> Glencore) and BHP Billiton (>> BHP Billiton Plc) were all down between 3.3 and 3.4 percent.
(Reporting by Danilo Masoni; editing by John Stonestreet)
By Danilo Masoni and Helen Reid