STOXX 600 jumps more than 1pc after Iran declares Strait of Hormuz open

FRANKFURT: The STOXX 600 jumped more than 1 percent and notched its fourth straight weekly gain on Friday, after Iran announced that the Strait of Hormuz, a conduit for a fifth of the world’s energy shipments, was now open.

The vital waterway can be used by all commercial vessels for the remainder of the truce agreed in Lebanon, Iranian Foreign Minister Abbas Araqchi said.

Global markets rallied on the news, with Wall Street indexes near record highs, while oil prices plunged as much as 11 percent.

The pan-European stock index climbed 1.6 percent to 626.58 points, close to levels seen before the beginning of the conflict.

Euro zone short-dated government bond yields dropped sharply to one-month lows, while money markets scaled back bets on future ECB rate hikes.

Most regional bourses also moved higher, with Germany’s DAX, Spain’s IBEX 35 and France’s CAC 40 gaining about 2 percent each.

European equities have underperformed US peers over the course of the conflict, reflecting the region’s high dependence on external oil and gas supplies, with inflation worries intensifying as oil prices soared.

“The way the market is reacting, there are signs that (the reopening) could be something more meaningful and hopefully sustainable, and we can move on from this to some extent,” said Ciaran Callaghan, head of European equity research at Amundi.

Travel and luxury stocks were the biggest gainers, jumping over 4 percent each.

LVMH, Hermes and Gucci-owner Kering all rose over 1.5 percent, after tumbling earlier in the week on warnings that the war was impacting sales.

Airlines, hit by the sharp increase in fuel costs and lower bookings, also recovered, with Ryanair, Lufthansa and easyJet up between 6 percent and 7.5 percent.

The aerospace and defense index jumped 3.1 percent, while euro zone banks gained 3.3 percent.—Reuters