LONDON – World stock markets got their foot back on the gas on Thursday as hopes grew that Washington could resolve its debt-ceiling squabbles and a global drop in energy prices tempered deepening fears of “stagflation”.

Europe’s bourses rallied off 2-1/2-month lows as easing oil and gas prices offered relief after a shock 4 percent drop in German industrial production, which highlighted the toxic “stagflation” risk of runaway inflation and moribund growth.

The pan-European STOXX 600 index rose 1.1 percent in broad-based buying to reverse weekly losses, with miners, utilities and carmakers all driving higher.

Bond market borrowing costs also calmed after a sharp spike a day earlier that had taken the region’s benchmark government yields to their highest point since June.

Oil was down more than 2 percent and gas prices dropped more than 3 percent, helping European gas futures fall back from record highs.

Gas prices are up more than fivefold since the start of the year, and the huge increase over recent weeks has attracted attention from policymakers across the world.

EU Energy Commissioner, Kadri Simson, said on Wednesday that the price shock was “hurting our citizens, in particular the most vulnerable households” and that “There is no question that we need to take policy measures”.

Britain’s National Grid said the UK faced tight electricity supplies this winter while local media reported that Spain’s Energy Minister had summoned the top executives of its three main electricity firms.