FRANKFURT: European stocks extended their rally on Wednesday, with the STOXX 600 notching its biggest three-day advance in nearly a year after US President Donald Trump said Washington will be “out of Iran pretty quickly.”
The pan-European index rose 2.5 percent to 597.69 points, led by a 5.9 percent jump in defence shares and a 4.5 percent gain in heavyweight banks. With the war in its fifth week and the White House under pressure to de-escalate amid rising gasoline prices, Trump said the US would leave Iransoon, but kept open the possibility of returning for “spot hits” if needed.
The jump in equities comes even as investors have been wrong-footed by repeated false dawns over the last month.
“As the conflict and waterway closure continue, global markets must increasingly consider how long until this shifts to a genuine negative supply shock,” said PIMCO economist Tiffany Wilding.
Most major regional bourses traded higher, with the financials-heavy Spanish and Italian benchmarks rising more than 3 percent each.
Brent crude futures fell, pushing the STOXX energy index down 2.5 percent.
But airline stocks received a boost from the drop in oil prices, with shares of Air France and Lufthansa jumping 8.9 percent and 8 percent, respectively. The sector had taken a beating in March after the closure of the key Strait of Hormuz sent oil prices surging.
European shares have been under pressure since the US and Israel began airstrikes on Iran on February 28 due to the continent’s heavy reliance on oil imports through the largely blocked-off Strait of Hormuz.
The STOXX recorded its steepest monthly decline since June 2022 in March.
Among individual movers, Britain’s Babcock International Group rose 9.5 percent after it agreed to a six-month bridging contract with the UK’s Ministry of Defence to maintain naval base and nuclear submarine fleet support services.
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