European stock markets extended their gains on Tuesday as oil prices continued to fall, driven by the US-Iran peace deal and expectations of restored shipping through the Strait of Hormuz.
London, Paris, and Frankfurt stock markets all climbed around 0.5 percent in midday trading, following a mixed session across Asian markets.
“Although the deal has not been formally signed, there already appears to be a peace dividend for markets,” said Kathleen Brooks, research director at trading group XTB.
Brooks added that “we are seeing European markets play catch-up with the US, and this could continue, as some European indices remain below their pre-war levels,” including London’s FTSE 100 (^FTSE).
US President Donald Trump said ships were already moving through the Strait of Hormuz and that the key route would be “completely open” by Friday.
Iranian media reported that three oil tankers and two cargo ships had already passed through the strait following the announcement.
Tehran had blockaded the strait after the US and Israel launched their war against Iran on February 28, prompting Washington to halt shipping to and from Iranian ports.
World oil prices fell more than two percent on Tuesday after Monday’s sharp drop, leaving international benchmark Brent North Sea crude trading at around $81 a barrel, with West Texas Intermediate (CL=F) down 2.8 percent at $78.46.
Despite the price fall, analysts warned that market conditions could remain tight for weeks or months, with US Energy Department data showing strategic oil stockpiles sank last week to their lowest level since 1983.
“Oil prices, for now, are hovering at the lowest level in two months, but it’s still trading at a premium compared to pre-conflict levels, demonstrating the ongoing uncertainties about supplies,” said Susannah Streeter, chief investment strategist at Wealth Club.
Investor focus this week also turns to a wave of central bank decisions, with the Federal Reserve on Wednesday set to leave interest rates unchanged despite inflation running at a three-year high.
The Bank of England is also expected to hold rates steady, while the Bank of Japan raised interest rates on Tuesday to their highest level since 1995.
The yen was little changed following the Bank of Japan’s decision, as traders absorbed the implications of the rate move alongside broader geopolitical developments.
In Asian trading, Seoul led gains with a surge of 2.1 percent, driven by continued strength in the technology sector and a boost from Elon Musk’s SpaceX.
SpaceX jumped almost 20 percent for a second consecutive session after listing at the end of last week, providing significant momentum to tech stocks across the region.
Tokyo’s Nikkei 225 briefly topped 70,000 points for the first time before closing up 0.1 percent, while Hong Kong’s Hang Seng fell 1.4 percent and Shanghai’s Composite edged down 0.1 percent.