European shares close volatile session higher

The pan-European STOXX 600 finished up 0.5% at 610.17 points, recovering from an almost 0.9% decline earlier in the session

European shares closed Monday’s volatile session higher, bouncing back from declines in the previous week, ‌as investors weighed developments in the Middle East amid rising concern over oil price-driven inflation and its impact on global economic growth.

The pan-European STOXX 600 finished up 0.5% at 610.17 points, recovering from an almost 0.9% decline earlier in the session. The index logged ​its first weekly decline since mid-April on Friday.

Despite the day’s gains, a stalemate between Iran and the U.S. and the continued closure of the vital Strait of Hormuz left investors worried about ⁠the scale and scope of energy-induced inflation pressures and their effect on the world’s economic growth.

Bets that central banks ​would soon hike interest rates led traders to sell bonds. In Europe, Germany’s benchmark 10-year bond yield hit a ​15-year high, with interest rate futures hinting that the European Central Bank could raise borrowing rates by at least 50 basis points by the end of the year.

European and world bond yields are increasing due to rising inflation expectations, because energy prices have started to ​bite and we do not have any material progress in the Strait of Hormuz, said Ipek Ozkardeskaya, senior ​market analyst at Swissquote Bank.

Given that the world’s oil reserves are plunging, we know that we are facing scarcity in ‌the coming ⁠months, she said.

Markets also weighed a report saying the U.S. had temporarily waived its sanctions on Iranian crude, even as Tehran sent a new peace proposal with terms that appeared similar to offers that Washington had previously rejected, although an official said the U.S. has softened its stance on some issues.