European stocks moved higher on Tuesday, with the region’s benchmark index approaching its record level as falling oil prices and fresh hopes of an end to the US-Iran conflict lifted investor sentiment.
The STOXX 600 rose 0.9 percent to 662.54 by 0805 GMT, trading less than 1 percent below its record high reached in early August. Major markets followed the same trend, with Germany’s DAX, France’s CAC 40 and Italy’s FTSE MIB each gaining around 1 percent.
The rally came as investors grew more optimistic about a possible diplomatic breakthrough in the Middle East. US President Donald Trump has played down the likelihood of fresh military action against Iran, easing fears that another escalation could disrupt energy supplies and push inflation higher.
Trump said on Monday that there was “positive momentum” towards ending the conflict after meeting Qatar’s prime minister at the White House. He also described further US strikes on Iran as “quite unlikely”, although he maintained that Washington remained prepared to act if needed.
The comments helped push oil prices lower, with Brent crude falling more than 2 percent to around $90 a barrel during early trading. West Texas Intermediate also extended its losses, dropping 1.59 percent to $85.47 a barrel.
Both major oil benchmarks have lost around 20 percent this month as traders increasingly bet on a diplomatic solution to the seven-month-long conflict.
Lower oil prices offered some relief to European airlines, which have faced higher fuel bills during the conflict. Lufthansa shares climbed 1.8 percent, while Air France-KLM gained 1.2 percent.
A sustained decline in energy prices could also ease inflationary pressures across Europe, giving central banks more room to avoid further interest rate increases. That prospect added to the positive mood in equity markets.
Individual stocks also contributed to the gains. Semiconductor maker Infineon rose 3.1 percent after forecasting revenue growth of more than 20 percent in 2027, alongside an improvement in profitability. The company pointed to growing demand from data centres, power infrastructure and software-defined vehicles.
German fertiliser producer K+S also advanced 2.3 percent after reporting third-quarter earnings above market expectations.
For investors, the immediate focus remains on developments in the Middle East. While hopes of a diplomatic settlement have helped lift European shares and bring oil prices down, the possibility of renewed military action continues to leave markets exposed to sudden shifts in sentiment.
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