A narrow election win for Greece's pro-bailout party New Democracy cheered investors in the hope that the embattled country has bought more time to remain in the euro.
The FTSE 100 Index in London opened more than 1% higher after the party, led by Antonis Samaras, secured 29.7% of the vote while anti-austerity group Syriza gained 26.9%.
The result, which saw Asian markets and the Dax in Germany rise more than 1%, meant a Greek exit from the euro - a major threat to global financial stability - was no longer an imminent threat. The euro rallied against most major currencies.
David White, a trader at Spreadex, said: "Last night the people of Greece kept the future validity of the eurozone alive."
Banking shares were among the biggest risers, with Lloyds Banking Group up 2%, Barclays ahead nearly 2% and Royal Bank of Scotland 1% stronger.
The Greek election was held against a backdrop of increased economic turmoil across the eurozone, with the likes of Spain and Italy seeing their borrowing costs soar as investors lose faith in the countries' abilities to control their finances.
Greece has had to adopt a range of far-reaching austerity measures as a condition of receiving rescue loans from the European Union and International Monetary Fund. The Greek people have reacted angrily to the conditions, fuelling a surge in popularity for parties such as Syriza that have argued against the country's bailout terms. Without the EU bailout cash, Greece would go bankrupt and probably have to leave the 17-country bloc.
But uncertainty remains, as conservative New Democracy did not win enough seats to form a majority and must now enter talks to form a coalition. World leaders have urged Athens to act quickly.
Mr White warned: "No sooner than when one set of questions marks have been removed, the next set appear. Markets, though welcoming of the result, will immediately turn to discounting news flows leading up to the announcement of whether a coalition can be formed, making even a positive outcome potentially volatile should the political process stall."
The price of gold fell to 1,617 US dollars an ounce as investors ditched safe-haven investments in favour of riskier assets as confidence improved. Volatile mining stocks also benefited from the more positive sentiment, with Kazakhmys, Evraz and Antofagasta all rising around 2%.