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European Stocks Erase Losses After Attack on Iran, STOXX 600 Hits Highest Level Since February

European stocks closed at their highest level since the end of February today. They erased the losses recorded since the start of the war with Iran. Investors are reacting mainly to hopes of a possible peace settlement and the prospect of renewed shipping through the key Strait of Hormuz.

Major European Indices Rose Sharply

The pan-European STOXX 600 index added one percent and closed at 631.63 points, its highest closing level since February 27. Frankfurt’s DAX index rose by two percent to 25,389.10 points, while Paris’s CAC 40 gained 1.76 percent to 8,258.26 points. Trading in London was closed today due to a public holiday.

Italy’s FTSE MIB stock index surpassed its historical high from 2000, rising by 1.2 percent to 50,121.2 points. Among individual sectors, banks performed particularly well, with their index adding three percent. Airline stocks also rose, supported in part by oil prices falling below USD 100 per barrel. Shares of German group Lufthansa gained almost 3.6 percent.

Hopes for Peace Support Investors’ Appetite for Risk

According to Iranian Foreign Ministry spokesman Esmaeil Baghaei, Iran and the United States have made significant progress on many issues related to a lasting end to the war. At the same time, he cautioned that this does not yet mean a peace agreement will be signed soon. US President Donald Trump said over the weekend that a memorandum of understanding had largely been negotiated. Although this is not a peace agreement, it could bring one closer.

Analysts at Capital Economics said that if the positive news is confirmed, there is still room for further stock market gains. At the same time, they pointed to several factors that could limit the rally. Energy prices are unlikely to return to normal immediately, and interest rate cuts are probably off the table this year in most major economies. According to the analysts, investors’ appetite for risk has remained resilient despite the conflict, meaning the potential for a major stock market rally in the event of a peace deal may be limited.