European equities rise on Middle East peace agreement
The pan-European STOXX 600 vaulted to a new record high, capitalizing on Friday’s momentum
European equities rose at the opening bell as a breakthrough peace agreement between Iran and U.S. boosted investor sentiment across markets and sent crude prices into a tailspin.
The pan-European STOXX 600 vaulted to a new record high, capitalizing on Friday’s momentum when markets first received concrete signals that a diplomatic resolution was imminent.
The market fireworks follow an announcement by U.S. president on Sunday confirming that Washington and Tehran have brokered a deal to immediately halt hostilities and reopen the critical Strait of Hormuz shipping lane.
Corroborating the breakthrough, Iran’s Deputy Foreign Minister Gharibabadi stated on state television that the accord is finalized and scheduled for formal signing this Friday.
That triggered a rally among local bourses as well. France’s CAC 40 gained 1.6%, while Germany’s DAX added 1.8%. London’s FTSE 100 and Italy’s FTSE MIB rose 0.9% and 2.5% respectively.
Declining crude prices sent airline stocks higher. Air France added 5.2%, while British Airways-owner ICAG advanced 4.6%. Lufthansa rose 5.6%.
This impending peace pact marks a dramatic turning point for European equities, capping off a volatile period that saw the market plunge into official correction territory – defined as a 10% decline from recent highs – back in mid-March.
The dual relief of a sustained pullback in oil prices and a reopening of the Strait of Hormuz is expected to significantly cool inflationary pressures across the Eurozone, a region deeply reliant on Middle Eastern energy imports.
Consequently, investors are scaling back bets on hawkish monetary policy.
Rate-sensitive real-estate stocks such as Segro added 2.6%, while Unibail-Rodamco-Westfield advanced 1.4%.
Among individual stocks, Saint-Gobain increased 5.4% after selling its DAHL business to Kesko for $1.7 billion.
Renault rose almost 6% after partnering with Thales.