European shares gain on hopes of potential US-Iran peace talks

European shares rose on Tuesday, recovering from a sombre start to the week, as investors were hopeful about potential Middle East peace negotiations, even as the US implemented a blockade of Iranian ports.

The pan-European index was up 0.6% at 617.58 points, as of 0717 GMT.

Sources familiar with the negotiations told Reuters that negotiating teams from the US and Iran could return to Islamabad this week, days after talks between the two countries ended without a breakthrough.

The development was sufficient to trigger a rebound in stocks, while oil prices retreated below $100 a barrel. Europe’s energy sector was down 0.2% on the day.

However, analysts caution that inflationary pressures from elevated energy costs will persist as long as the strategically crucial Strait of Hormuz remains closed to commercial shipping.

European markets have weathered significant headwinds due to the continent’s heavy reliance on energy imports.

Despite these challenges, the STOXX 600 index has gained about 4% year-to-date, slightly outperforming the US benchmark S&P 500’s 0.5% rise over the same period.

Industrial and technology stocks were up 0.9% and 1.5%, leading sectoral gainers Meanwhile, the personal and household goods sector led losses, down 0.4%.

Among stocks, France’s LVMH dropped 2% after the luxury group said the Iran war shaved at least 1% from group sales in the last quarter due tto lower spending in the Gulf.