PostGreSQL first, MySQL second, Oracle third, Microsoft SQL server fourth.
Atlassian strongly recommend PostGreSQL, but as I read between the lines, MySQL is a pretty close second at the moment. You can make it work with all sorts of other databases too, but those are the four that Atlassian officially support, so I wouldn't run with another one unless you have a strong reason to do so.
Personally, I'd like to add that all of the databases I've used with Atlassian software (Think I'm on 9 or 10 now) have quirks, but the only one that's been a monumental pain in the fundament is MS SQL. I'd rather support Jira on a file/ISAM based system. Or post-it notes.
If you have to get into a fight about which SUPPORTED one to use, then I would actually say "whichever your organisation is most familiar with" (but not MS), as it's pretty close.
Oh - and versions - use the latest whenever you can. But, again, what your organisation is happiest with is better. Always check https://confluence.atlassian.com/display/JIRA/Supported+Platforms first.
You name it.
Performance was the first problem I ran into - as Jira grew, it slowed down. Pretty basic like-for-like testing showed PostGreSQL was scaling up fine, as MSSQL ground to a halt.
Another installation ran into problems with dashboards (note - Jira 3.5 to 3.10, so it was portlets) and some of the reports in the charting plugin. Atlassian recommended trying Oracle, problem disappeared (Note - they did say "try", without guarantees. We never really followed up beyond saying "yes, thank you for the suggestion, it's all good". Oracle worked, MS didn't, client happy)
Yet another was based on an accident - they started doing detailed network monitoring and found that there was a stupid amount of load to and from MS database servers. Rather than spend time and money finding and fixing that, they made the decision that simply moving as much as possible to databases that didn't behave that way off-the-shelf solved the problem.
More recently (Jira 3.12 to 4.2), I've migrated six or seven small-to-medium installations off MS-SQL. A couple were for simple cost reasons, but most were down to constant database connection errors and intermittent slow-downs executing SQL queries.
All of the sites have suffered from driver problems - the MS provided JDBC drivers rarely even work, let alone work well, and despite some sterling work on JTDS which can work very well, it's still years behind the others.
In short, my experience is that MS-SQL is less performant, less stable, far harder to set up (properly) and more difficult debug than the others.
One caveat - I effectively gave up on MS-SQL about 3 years ago. It may have improved. (I doubt it, but my only recent experience was a from a handful expert DBAs and technical architects laughing at a Java/MSSQL performance test around 3 months ago)
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