European stocks mark biggest daily jump in months on Gulf de-escalation hopes

EUROPEAN shares marked their biggest one-day jump since April last year on Tuesday as global markets bet that US President Donald Trump would call off the US-Israeli war on Iran soon, lifting investor sentiment and sparking a broad-based rally.

The pan-European Stoxx 600 index ended 1.9 per cent higher at 606.12, after closing on Monday at its lowest level in more than two months.

Bank stocks, which have been among the worst hit as a result of recent investor concerns, recovered 3.6 per cent, led by HSBC and Santander and giving the biggest boost to the Stoxx 600.

Spain’s financial-heavy index outperformed major peers with a 3.1 per cent rise, followed by the export-heavy DAX in Germany. Both logged their steepest one-day gain since April 2025.

Industrials gained 2.8 per cent, while travel and leisure stocks jumped 2.5 per cent, on prospects of flights and tourism returning to normal operations.

Although the US and Israel pounded Iran with what the Pentagon and Iranians on the ground said were the most intense airstrikes of the war, investors were encouraged by Trump’s saying on Monday that the war was “very complete, pretty much”.

“For now, we believe the shock is likely to be short-lived. We see disruptions measured in weeks, rather than in months or days,” said analysts led by Jean Boivin at BlackRock Investment Institute.

“In Europe, we like the financial, pharma and infrastructure sectors,” they added.

Oil prices remained in the spotlight, as Iran said it would block shipments from the Gulf until the attacks cease. They swung widely, falling 11 per cent to below US$90 a barrel and energy shares reversed declines to close 0.3 per cent higher.

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The spike in oil prices since the US-Israeli strikes on Iran has revived inflation fears globally, putting central banks in a tough spot. Europe, which is heavily dependent on energy imports, remains vulnerable when growth is already fragile.

Three European Central Bank policymakers said that it should take its time to reassess policy and stay on its present course for now. Investors are now pricing in at least one ECB rate hike by the end of the year, LSEG data shows.

“In the escalation scenario, the ECB could think to hike once in the short term,” said Michele Morganti, equity strategist and head of insurance at Generali Investments.

“The risks continue to be high, and Europe has much to lose from the energy ... and growth point of view.”

Among notable individual stock price moves, Volkswagen climbed 2.6 per cent as the German autos group forecast a margin recovery after a tough 2025.

Persimmon jumped 4.5 per cent after the British housebuilder beat expectations for fiscal year 2025 revenue and adjusted pretax profit, while Rotork slumped 13 per cent to the bottom of the Stoxx 600 after it published annual results. REUTERS