European shares edged higher on Monday, supported by a sharp rally in British housebuilders, although gains were limited by rising oil prices and elevated bond yields as investors assessed the outlook for inflation and interest rates, Reuters reported.

The pan-European STOXX 600 index was up 0.3% at 640.43 points by 0725 GMT, while most major regional bourses also traded in positive territory.

British housebuilders were among the strongest performers after the government said it would confirm a new equity loan programme for first-time buyers in next month's budget. The move revived expectations of renewed government support for home ownership and residential construction.

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Persimmon, Barratt Redrow, Taylor Wimpey and Vistry rose between 13% and 17%.

However, the broader market advance was restrained by a rebound in crude prices. Brent crude rose more than 3% after U.S. President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz and end the conflict, keeping tensions in the Middle East at the forefront of investor concerns, Reuters reported.

European energy stocks edged 0.5% higher, benefiting from the rise in oil prices. Miners, meanwhile, fell about 2% as dollar-priced metals came under pressure from a stronger U.S. currency.

Investors were also awaiting speeches from European Central Bank President Christine Lagarde and Bank of England Deputy Governor Dave Ramsden later on Monday, with markets focused on signals about the path of monetary policy as central banks grapple with persistent inflationary pressures.

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According to Reuters, investors have been reassessing the outlook for interest rates as higher energy prices risk adding to inflation and complicating the policy outlook for major central banks.

Among individual stocks, Akzo Nobel gained around 1% after JPMorgan reinstated coverage of the company with an "overweight" rating.