Enthusiasm on Europe's stock markets, which climbed to a record high: “There is a palpable sense of relief”
Europe's STOXX 600 index hit a record high on Monday, boosted by a rebound in markets across most sectors after the United States and Iran reached a preliminary deal that would reopen the Strait of Hormuz and end the Middle East conflict, Reuters reports.
Global risk appetite got a boost and Brent oil prices fell nearly 5 percent after US and Iranian officials said they had agreed on a framework for a deal, due to be signed on Friday.
The pan-European STOXX 600 index rose 1% to 639.20 points at 08:02 GMT (11:02 in Romania), surpassing the previous all-time high reached on February 27.
Return of oil flows 'will give European markets a real boost'
Monday's gains saw the benchmark recover all of its conflict-related losses, while the euro volatility index STOXX .V2TX hit its lowest level since the conflict began in late February.
European stocks have generally underperformed their US and Asian counterparts since March, largely due to the continent's reliance on the Strait of Hormuz for oil supplies and its lower exposure to stocks in the AI technology sector.
Thanks to Monday's gains, the STOXX 600 is up 7.9 percent this year, closing the gap on the U.S. benchmark S&P 500, which is up more than 8 percent.
“If oil really starts flowing again in a sustainable way, then that will give European markets a real boost,” said Chris Beauchamp, chief market analyst at IG Group.
“There will be many fund managers who will look at the situation and think, 'Well, the problem with investing in the technology sector at these rates is that they are extremely expensive, and a lot of the good news is already reflected in the prices,'” he explained.
“There is palpable relief in Europe”
Germany's DAX was the biggest gainer among the main regional indices, rising 1.6% to hit its highest level in two weeks. France's CAC 40 index advanced 1.2% and hit its highest level since early March.
The gains were across the STOXX 600. The luxury sector, which has been the hardest hit this year in the STOXX index, rose 3.4% and led the gains.
Shares in the energy-sensitive auto sector gained 3 percent, while airlines Lufthansa and Air France rose 4.7 percent and 2.8 percent respectively.
The broader tourism and leisure sector hit a record high, while the banking index hit its highest level since January 2008.
“There is a palpable sense of relief in Europe. The ECB will be pleased that it no longer has to keep talking about tight monetary policy and that will probably offset the slight embarrassment it feels at having to resort to an interest rate hike last week,” Beauchamp said.
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