May 25 - European equities began Monday trading at their loftiest levels in more than two months, supported by market optimism that talks between Iran and the United States could lead to a diplomatic resolution. As of 0712 GMT the pan-European STOXX 600 stood at 628.93 points, up 0.61%, trading just below the late-February record it reached prior to the eruption of the Middle East conflict.
Most sectors posted gains, with financial stocks among the strongest performers. Banks led the advance with an approximate 1.7% rise. Regional carriers recorded notable strength as Brent crude weakened; Lufthansa and Air France KLM climbed about 4.2% and 9%, respectively, on a roughly 5% slide in Brent to $98 a barrel.
Investor attention appeared to tilt toward a Saturday statement by U.S. President Donald Trump that Washington and Iran had "largely negotiated" a memorandum of understanding on a peace arrangement that would reopen the Strait of Hormuz. That comment seemed to carry greater weight for markets than Mr. Trump’s separate warning that he was in no hurry to finalise a deal.
Despite the improved tone, significant uncertainties persist. The article notes that clarity remains limited on several divisive matters between the parties, including Iran’s nuclear programme. The Strait of Hormuz is a strategic chokepoint for global energy flows - roughly one-fifth of the world’s crude oil and natural gas transits this waterway - and it is particularly important for Europe, which depends on energy imports.
European equities have lagged some global peers amid concerns that higher crude prices could stoke regional inflation pressures. A drop in oil helped alleviate some of those worries Monday, contributing to gains across the STOXX 600.
On the single-stock front, Delivery Hero surged about 12% after a report said Uber’s board met on Saturday to discuss raising its offer for the German food-delivery group. The meeting followed the rejection by a major shareholder of a bid that valued the company at more than 11.5 billion euros ($13.39 billion).
Trading activity was expected to be lighter than usual because markets in the United States and the United Kingdom were closed for public holidays.
Market context - A tentative diplomatic development reduced some risk premia tied to Middle East hostilities, while falling Brent supported airline names and eased near-term inflation concerns that had weighed on European equities.