European shares climb to over two-month highs on Iran-US peace optimism

European shares opened sharply higher on Monday, hitting their strongest levels in more than two months, as easing geopolitical tensions between Iran and the United States lifted investor sentiment and reduced concerns over inflation and global growth risks.

The pan-European STOXX 600 index rose 0.61% to 628.93 points as of 0712 GMT, edging closer to its record high reached in late February, just before conflict escalations in the Middle East disrupted markets.

Most sectors traded in positive territory, with financial stocks leading gains. The banking index advanced 1.7%, while travel-related shares also rallied strongly. Airline stocks surged, with Lufthansa climbing 4.2% and Air France-KLM jumping 9%, as oil prices declined. Brent crude fell 5% to about $98 per barrel, easing cost pressures for fuel-dependent industries.

Investor sentiment was supported by remarks suggesting progress in negotiations between Washington and Tehran. Although U.S. President Donald Trump indicated there was no urgency to finalize an agreement, he also stated over the weekend that both sides had “largely negotiated” a framework toward a possible peace deal that could eventually reopen the Strait of Hormuz, a critical global shipping route.

Despite the optimism, uncertainty remains over key sticking points, particularly Iran’s nuclear program, which continues to be a central issue in the discussions. Market participants are closely watching developments, given the potential impact on global energy supply chains.

The Strait of Hormuz is a vital passage through which roughly one-fifth of the world’s crude oil and natural gas flows, making it especially important for energy-importing regions such as Europe. The STOXX 600 has underperformed global equities in recent months amid concerns that higher oil prices could fuel inflation across the region.

Among individual stocks, Delivery Hero surged 12% after reports indicated that Uber’s board had discussed increasing its bid for the German food delivery company. The renewed interest follows a previously rejected offer valued at more than 11.5 billion euros ($13.39 billion) by a major shareholder.

Trading activity is expected to remain subdued throughout the session, with both U.S. and U.K. markets closed for public holidays, reducing overall market liquidity. -Reporting by Johann M Cherian in Bengaluru; Editing by Sherry Jacob-Phillips/Reuters