(Sharecast News) - European shares closed slightly higher on Tuesday as investors looked past concerns about rising inflation and energy supply shortages linked to the Iran war, instead focusing on the latest peace efforts between Washington and Tehran.
The pan-European Stoxx 600 rose 0.27% to 611.81.
Germany's DAX gained 0.49% to 24,428.17, while France's CAC 40 was broadly flat, slipping 0.005% to 7,987.13.
London's FTSE 100 edged up 0.07% to 10,330.55.
In commodities, Brent crude futures were last down 1.38% on ICE at $110.55 per barrel, while the NYMEX quote for West Texas Intermediate was 0.06% lower at $108.60.
US president Donald Trump said on Monday that he had called off an attack on Iran scheduled for Tuesday after requests from Qatar, Saudi Arabia and the United Arab Emirates.
"A Deal will be made, which will be very acceptable to the United States of America, as well as all Countries in the Middle East, and beyond. This Deal will include, importantly, NO NUCLEAR WEAPONS FOR IRAN!," Trump wrote on social media.
Axel Rudolph, chief technical analyst at IG, said: "European stock indices began the day on a strong footing, adding to Monday's solid gains on hopes of de-escalation in the Middle East, but were dragged down by their US peers.
"These came under pressure after the US 10-year Treasury yield rallied to a 16-month high and the 30-year yield to levels last seen in July 2007."
Rudolph added: "High energy prices, a pick up in inflation and robust economic backdrop increased bets on the Fed hiking rates this year, putting pressure on stocks.
"Yields rose globally with Japanese borrowing costs hitting record highs and those of long-dated bonds in the UK rising towards 1998 levels."
Danni Hewson, head of financial analysis at AJ Bell, noted that oil prices may have fallen on Trump's announcement that he'd delayed planned strikes on Iran, but it was still above $110 a barrel, as that "stickiness" was being felt at the petrol pump."
"The RAC says the price of filling up with unleaded has hit its highest level since the start of the war - and that's going to insidiously creep through to other prices," she added.
"This will ultimately result in higher inflation, even if tomorrow's data looks set to show a decline in the headline rate."
Rudolph said oil's initial fall had not fully eased investor concerns.
"The initial drop in oil and gas prices as US president Trump apparently held off on Iran strikes was followed by a rise in crude as Iran didn't confirm that talks between the two nations are taking place.
"The US dollar - which initially weakened - added to last week's gains and hit a six-week high amid headlines proclaiming that Nato may consider a Hormuz deployment if the Strait is not open by July."
Euro area goods trade surplus narrows
On the economic front, the eurozone's goods trade surplus narrowed sharply in March.
Eurostat said the surplus fell to 7.8bn from a record 34.1bn a year earlier and 11.1bn in February, although the decline was smaller than the 5.4bn expected by economists.
Exports fell 5.5% year-on-year to 265.3bn, while imports rose 4.4% to 257.4bn, with Eurostat pointing to substantial reductions in surpluses for chemicals and related products, as well as machinery and vehicles.
In the first quarter, the eurozone trade surplus stood at 16.6bn, down from 55.4bn in the same period of 2025, reflecting the impact of the Middle East war and the closure of the Strait of Hormuz on energy costs, sentiment and supply chains.
In the UK, unemployment edged higher in the first quarter while regular wage growth slowed.
The Office for National Statistics said the unemployment rate was 5.0% in the three months to March, slightly above expectations for 4.9%, while annual growth in regular pay excluding bonuses eased to 3.4% from 3.6%.
Total pay growth, including bonuses, rose to 4.1% from 3.9%, ahead of forecasts for a slowdown to 3.8%.
Liz McKeown, director of economic statistics at the ONS, said the labour market remained soft, with vacancies at their lowest level in five years and unemployment higher than a year earlier.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said the data put a softer labour market "back at the centre of the rates debate" and suggested companies were responding to higher costs by cutting headcount rather than pushing wages materially higher.
James Smith, developed markets economist at ING, said the jobs report was a reminder that the UK economy was "much less susceptible to second round effects from the incoming energy shock".
He said ING still expected a rate hike in June, although that was "far from guaranteed" and would depend heavily on Wednesday's inflation data.
Hewson said the effect of higher energy costs would take time to appear fully in inflation data.
"It takes time for the cost of manufacturing, delivering and keeping stuff chilled to work through the system and the fall in the energy price cap in April is expected to have offset other increases.
"Although the Bank of England's 2% target feels further away than it has in a long time."
Evolution jumps, Vallourec in the red
In equity markets, Evolution rose 7.26% after the Swedish gambling technology group announced a 2bn share buyback.
Saab gained 4.38% after reports that Sweden would buy navy frigates from France in its biggest military investment in decades, with Saab being lined up to develop radar and weapons systems for the country's naval capabilities.
Uniper surged 11.86% after the German government announced plans to reprivatise the energy group, which was bailed out during the 2022 European energy crisis at a cost to taxpayers of 13.5bn.
The government, which owns 99.12% of Uniper, said it intended to sell or list the group.
On the downside, Vallourec fell 8.06% after ArcelorMittal sold secondary shares representing a 10% stake in the French steel tubes maker at a discount.
Reporting by Josh White for Sharecast.com.
6.80 (0.07%)
43.73
0.00