Europe’s STOXX 600 ends at record high as US-Iran deal lifts sentiment

FRANKFURT: Europe’s STOXX 600 hit a record high on Monday, boosted by a relief rally across most sectors after the United States and Iran reached a preliminary agreement that would open the Strait of Hormuz and end the three-month-long war in the Middle East. Brent crude prices fell to three-month lows, while the pan-European index closed 0.2 percent higher, recouping its losses since war began on February 28, after US President Donald Trump, Vice President JD Vance and Iranian parliament speaker Mohammad Bagher Qalibaf signed the memorandum of understanding.

The index surpassed its February 27 peak, while the Euro STOXX volatility index hit its lowest since late January.

European shares had broadly underperformed their peers in the US and Asia since March, largely due to the continent’s reliance on the Strait of Hormuz for crucial oil supplies and its smaller exposure to AI technology stocks.

With Monday’s gains, the STOXX 600 is now up 7.2 percent for the year, narrowing its gap with the US benchmark S&P 500 that has risen more than 10 percent.

“It’s probably the time you should see some rotation … you might be taking gains in some of the AI names that have rallied very hard over the last month or two and could be recycling that into areas like defense in Europe, which have been weak,” said Michael Field, chief equity strategist at Morningstar.

Spain’s financials-heavy index led gains among major regional indexes, climbing 1.4 percent to record highs. Germany’s DAX index rose 1.1 percent to a near two-week high. France’s CAC 40 index gained 0.4 percent to pre-war levels.

Banks were among the biggest boosts to the STOXX 600, adding 1.5 percent to hit their highest since January 2008. Energy price-sensitive auto stocks gained 2.6 percent, while airlines such as Lufthansa and Air France jumped 4.5 percent and 3.4 percent, respectively.

Still, analysts expect energy costs to remain elevated until flows gradually return to pre-war levels. Concerns over energy-driven inflation led the European Central Bank to hike interest rates by 25 basis points last week.