FRANKFURT: European stocks soared on Tuesday, buoyed by a ceasefire between Israel and Iran, while a slump in oil prices dragged energy stocks lower.
The pan-European STOXX 600 index rose 1.11%, hitting a one-week high during the session and notching its biggest single-day jump in over a month.
While most sectors basked in the rally, energy stocks lagged as oil prices tumbled 5%. The sharp drop came after Iran’s token response signalled no imminent threat to the critical Strait of Hormuz shipping route.
Airlines and travel stocks soared, with the sector vaulting 4.3% - its biggest daily rise in more than 18 months - as hopes rose that the ceasefire would stick.
The optimism followed US President Donald Trump’s late-Monday announcement that Israel and Iran had agreed to halt hostilities, a deal he confirmed was “in effect”, pressing both sides to honour the truce.
Iran’s President Masoud Pezeshkian echoed that sentiment, vowing Tehran would stick to the deal unless provoked by Israel.
“There is political will and a desire for peace from all parties... If they can follow through, I think we will see a permanent ceasefire and we have to believe it can happen,” said Nick Saunders, CEO of stock trading platform Webull UK.
Germany’s DAX surged 1.6%, riding a dual wave of ceasefire relief and fresh economic stimulus after lawmakers approved record-setting investment plans for 2025 and 2026 to jump-start growth in Europe’s economic powerhouse.
Other bourses also gained, with French and Spanish markets up more than 1% each, while Britain’s was flat.
As the quarter winds down, the STOXX 600 is on track for a second straight quarterly gain, though the index is still set to close the month more than 1% lower.
With Middle East tensions easing, investor focus is shifting to the looming July 8 US tariff-pause deadline, as the EU hustles to clinch trade deals with Washington. Progress has been slow, save for an agreement with London.
“As Middle East tensions de-escalate, the focus will return to more fundamental concerns for investors such as tariffs,” said Chris Brigati, chief investment officer at SWBC.
Among other stocks, Carnival Corp jumped 11.8% after the cruise operator raised its annual profit forecast.
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