European stock markets reached their highest levels in over two months on Monday, buoyed by news of potential progress toward a ceasefire between the United States and Iran, easing concerns over inflation and a global economic slowdown.
At 08:18 GMT, the pan-European STOXX 600 index rose 0.67% to 629.28 points, approaching the record high set in late February before the outbreak of conflict in the Middle East.
Most sectors advanced, with banking stocks leading the gains, up 1.9%. Brent crude oil fell sharply by 4.7% to $98 per barrel, boosting airline shares. Lufthansa and Air France-KLM saw their stock prices rise by 3.7% and 7.5%, respectively.
Both Iran and the U.S. have indicated that a major breakthrough is unlikely in the short term. However, investors remain focused on remarks made by U.S. President Trump on Saturday, stating that a framework agreement to reopen navigation through the Strait of Hormuz is largely finalized.
Core disputes, such as Iran's nuclear program, remain unresolved.
Kyle Rodda, a senior financial markets analyst at Capital.com, noted that disagreements over Iran's nuclear activities, uranium enrichment, and control of the strait will continue to hinder negotiations. The current agreement is likely to only extend the ceasefire, with minor adjustments to rules for oil tanker passage, temporarily easing tensions.
Approximately one-fifth of the world's crude oil and natural gas is transported through the Strait of Hormuz, making the waterway critical for energy-dependent Europe. Earlier oil price increases had fueled inflation expectations, causing European stock indices to underperform other global markets.
This week, investors will closely monitor inflation data from multiple eurozone countries to gauge price pressures in May. The market expects the European Central Bank to implement two interest rate hikes this year, each by 25 basis points.
In individual stock movements, Delivery Hero's share price surged 11%, hitting an 18-month high. This followed a board meeting at Uber, which plans to increase its acquisition offer after a previous proposal valued at over €11.5 billion was rejected by major shareholders.
Amid escalating tensions between Russia and Ukraine, as Russian forces intensify strikes on Kyiv and surrounding areas, the defense sector rose 1.5%.
The energy sector underperformed as oil prices declined.
Trading activity was subdued as U.S. and UK markets were closed for public holidays.
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