European stock markets surged at the start of trading as investor optimism strengthened after the United States and Iran announced a peace agreement, easing concerns over energy supplies and geopolitical tensions.
The pan-European STOXX 600 climbed to a new all-time high, building on gains recorded at the end of last week when indications first emerged that a diplomatic solution between Washington and Tehran was nearing completion.
The positive momentum followed confirmation from U.S. President Donald Trump on Sunday that the two countries had agreed to immediately end hostilities and reopen the Strait of Hormuz, one of the world’s most important shipping routes for oil and gas exports.
Iranian Deputy Foreign Minister Kazem Gharibabadi later reinforced the announcement, stating on state television that the agreement had been finalized and would be formally signed on Friday.
Major European Indices Rally
The improved geopolitical outlook triggered broad-based gains across European equity markets.
France’s CAC 40 advanced 1.6%, while Germany’s DAX added 1.8%. London’s FTSE 100 gained 0.9%, and Italy’s FTSE MIB outperformed with a rise of 2.5%.
Investors welcomed the prospect of lower energy costs and a reduction in geopolitical risk, driving buying activity across multiple sectors.
Airlines Lead Gains as Oil Prices Retreat
The sharp decline in crude prices provided a significant boost to airline stocks, which are among the biggest beneficiaries of lower fuel costs.
Air France (EU:AF) rose 5.2%, British Airways parent ICAG (LSE:IAG) gained 4.6%, and Lufthansa (TG:LHA) advanced 5.6%.
The easing of energy prices is expected to improve operating margins across the aviation industry, while also supporting broader consumer demand for travel.
Lower Inflation Expectations Support Rate-Sensitive Sectors
The combination of weaker oil prices and the planned reopening of the Strait of Hormuz is expected to ease inflationary pressures across the Eurozone, which remains heavily dependent on energy imports from the Middle East.
As a result, investors have reduced expectations for tighter monetary policy. Market participants are reassessing the outlook for interest rates as lower energy costs could lessen the need for restrictive policy measures.
Real estate stocks, which tend to be sensitive to interest-rate expectations, moved higher. Segro (LSE:SGRO) gained 2.6%, while Unibail-Rodamco-Westfield (EU:URW) rose 1.4%.
Corporate Movers Add to Market Strength
Among individual stocks, Saint-Gobain (EU:SGO) climbed 5.4% after announcing the sale of its specialist distribution business to Kesko in a deal valued at $1.7 billion.
Renault (EU:RNO) also performed strongly, rising nearly 6% after unveiling a new partnership with Thales (EU:HO).
The combination of easing geopolitical tensions, lower oil prices and positive corporate developments helped propel European equities to fresh record levels.
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