European shares edge higher as oil falls; Nvidia earnings in focus

Aug 26 (Reuters) - European shares edged higher on Wednesday as a drop in oil prices dragged bond yields lower on hopes that the Strait of Hormuz may reopen soon, while investors braced for an earnings report from AI bellwether Nvidia.

The pan-European STOXX 600 was up 0.1% at 657.34, as of 0703 GMT, with basic resources leading sectoral gains, up 0.9%.

Iran said it had restarted talks with Oman on managing the Strait of Hormuz amid mounting pressure from U.S. President Donald Trump in the nearly six-month conflict that has roiled oil markets and stoked global inflationary worries.

Brent crude futures fell for a third straight day, dropping more than 2% to around $86 a barrel on prospects of increased oil flows through Hormuz, helping drive bond yields lower. The energy index fell 1.1% and was the worst performing sector on the STOXX 600. [O/R]

Investors now await Nvidia's second-quarter earnings, due later in the day, for clues on whether the AI-driven spending boom can continue to justify lofty market expectations. 

Tech shares fell 0.2% ahead of the results.

Attention is also on a key U.S. inflation report on Wednesday as investors look for fresh clues on the Federal Reserve's interest rate path.

(Reporting by Tharuniyaa Lakshmi in Bengaluru; Editing by Sonia Cheema)