By Josie Cox 

European shares reversed earlier losses Tuesday, shrugging off fears surrounding the potential implications of additional sanctions on the Russian economy, even though jitters earlier in the session had spurred a wave of demand for safe-harbor assets.

By midafternoon, the Stoxx Europe 600 was 0.6% higher, buoyed by indexes in Germany, France and the U.K all rising between 0.6% and 0.9%, with traders citing some solid corporate earnings reports coupled with upbeat U.S. consumer sentiment data.

Earlier in the session, a lack of transparency on the breadth and severity of U.S. sanctions had weighed on equities and sent investors clambering for safe-harbor assets.

The yield on the 10-year German Bund fell to a record low of 1.122%, surpassing levels seen even in the depths of the euro crisis, while gold added sharply to trade at $1,311.20 a troy ounce. Yields fall when prices rise.

Despite some relief later in the day, the Russian ruble remained under pressure, falling 0.4% against the U.S. dollar, to 35.71--its lowest level since May.

It now costs an average of $235,000 a year to insure $10 million of Russian debt for five years, roughly $9,000 more than on Monday, according to Markit.

"It is always the case with markets that uncertainty drives volatility and that is exactly what is happening here," said Peter Dixon, an economist at Commerzbank in London.

Philip Shaw, chief economist of Investec Bank PLC, said that while the idea of sanctions isn't new, investors are becoming unnerved by the simple intensification of conflict between the West and Russia, signaled by the sanctions but also by reports of increased Russian troop movement.

The burst of early nerves Tuesday followed news that U.S. President Barack Obama and European leaders agreed late Monday to adopt new sanctions this week against critical sectors of Russia's economy. The White House also warned that Moscow is amassing troops along the border in possible preparation for a further incursion in Ukraine.

"The news is ever-depressing," said Kit Juckes, a macro strategist at Société Générale, pointing also to the conflict in Gaza. "While there is little further contagion so far, we have a weaker rand and weaker Turkish lira this morning. The right approach all year has been to buy into geopolitically inspired softness in emerging markets, at least in countries not directly implicated, but a thin summer market can be a bit more jittery."

For Bunds, support is stemming from a concerns that European sanctions against Russia could pinch economies in Germany and other pockets of the euro zone.

"There is a definitely risk of a blowback into the European economy [from Russian sanctions] and that is why Bunds are rallying," said Alastair Thomas, head of rates and treasury management at ECM Asset Management.

"If sanctions are particularly tough, they could pose a risk to growth in the region and that in turn could provide more impetus for the ECB to engage in quantitative easing later in the year," added Mr. Thomas.

"Investors are fairly confident there would be European Central Bank policy response, which could take them down the quantitative easing route" Lyn Graham-Taylor, interest-rate strategist at Rabobank, agreed.

Like broader European markets, however, Russia's indexes proved broadly resilient, with the Micex adding 0.5%. The dollar-traded RTS remained 0.2%, in the red having recouped some earlier losses.

-- Stacy Meichtry, Carol E. Lee, Tommy Stubbington and Ben Edwards contributed to this article.

Write to Josie Cox at josie.cox@wsj.com and Tommy Stubbington at tommy.stubbington@wsj.com