(Sharecast News) - European equities finished higher on Tuesday as investors reacted to reports that Donald Trump could be prepared to wind down the conflict with Iran, even if the Strait of Hormuz remained closed, easing fears of a prolonged escalation in the Middle East.
As Axel Rudolph, chief technical analyst at IG, put it, "Hopes of a ceasefire in the Middle East and month-end positioning helped stocks recover from multi-month lows as yields retrace".
The pan-European Stoxx 600 rose 0.43% to 583.21, with Germany's DAX up 0.31% at 22,633.18 and France's CAC 40 gaining 0.57% to 7,816.94.
London's FTSE 100 added 0.48% to 10,176.45.
Energy markets remained volatile, with Brent crude futures last up 5.46% on ICE at $118.94 per barrel, and the NYMEX quote for West Texas Intermediate rising 1.28% to $104.20.
Rudolph added that "European stocks also fared better despite euro area inflation hitting its highest level since January 2025," and said that "given the high oil price - at well above $100 - this is expected to change at the next reading."
Sentiment was supported by a Wall Street Journal report stating that Trump had told aides he was willing to end the military campaign against Iran even if the Strait of Hormuz remained largely closed, potentially delaying efforts to reopen the key shipping route.
Patrick Munnelly, market strategy partner at TickMill, said "Global markets saw a rebound when the Wall Street Journal revealed that US president Donald Trump had indicated to his aides a willingness to cease military operations against Iran, even if the strategic Strait of Hormuz remained largely inaccessible."
However, signals from Washington remained mixed after the US president also warned on Monday that he could "obliterate" Iran's energy infrastructure if Tehran did not agree to peace terms soon.
Geopolitical tensions persisted after Iran attacked a fully loaded Kuwaiti crude oil tanker off Dubai on Tuesday, although response teams contained the incident with no reported injuries or oil leakage.
Rudolph added that "the war in the Middle East drags on," noting that "the price of WTI is rapidly catching up with that of Brent crude with both trading around 50%-to-56% higher than at the end of February".
Euro area inflation accelerates in March
On the economic front, eurozone inflation accelerated to 2.5% in March from 1.9% in February, according to flash estimates from Eurostat, as energy prices rose 4.9% following a 3.1% decline the previous month.
Core inflation, which strips out energy, eased slightly to 2.3% from 2.4%, suggesting underlying price pressures remained relatively contained despite the surge in oil and gas costs.
Rudolph noted that "euro area inflation hitting its highest level since January 2025 and French inflation almost doubling in March" underscored persistent price pressures.
In Germany, retail sales fell by 0.6% month on month in February, undershooting expectations for a 0.3% increase and pointing to weakening consumer demand in Europe's largest economy.
Food sales declined 1.4%, while non-food retail rose 0.7% and online sales increased 0.6%.
On an annual basis, retail sales rose 0.7%, while January's figure was revised to a 1.1% decline.
UK data painted a mixed picture, with the economy expanding by 0.1% in the fourth quarter of 2025, unchanged from the previous estimate, as growth remained subdued.
Output in the production sector rose 1.2%, while construction fell 2.0% and services showed no growth.
Annual GDP growth was revised up slightly to 1.4%.
The household saving ratio increased to 9.9%, reflecting continued caution among consumers.
Munnelly added that "the Bank of England is keeping a close watch on food prices, as public inflation expectations reached their highest point since March 2023, adding caution to the policy outlook."
More recent indicators showed some resilience in the housing market, with Nationwide reporting that UK house prices rose 0.9% in March, lifting the average price to 277,186 and taking annual growth to 2.2%.
Munnelly said that "data from mortgage lender Nationwide revealed that British house prices exceeded expectations in March," but cautioned that "the housing market is anticipated to slow down due to increased borrowing costs stemming from the Iran conflict, which will affect affordability."
However, the outlook remained uncertain amid rising energy costs and shifting interest rate expectations, with markets now pricing in three rate rises this year rather than previously expected cuts.
In the US, consumer confidence edged up in March, with the Conference Board's index rising to 91.8 from 91.0, supported by stronger assessments of current conditions even as expectations for the future weakened and inflation concerns intensified.
Rudolph noted that "job openings also decreased and came in below forecasts," pointing to some softening in the labour market.
Unilever slides on McCormick deal, UBS in the green
In equities, Unilever shares fell 7.28% after the group agreed to merge its food business with McCormick & Company in a $44.8bn deal, with Unilever shareholders set to hold a majority stake in the combined entity.
Novo Nordisk slipped 0.11% after launching a subscription model for its Wegovy obesity treatments aimed at offering more predictable pricing.
On the upside, UBS Group rose 3.96% following a report that Swiss lawmakers could ease capital rules, potentially allowing the bank to raise its capital requirements by $22bn.
Reporting by Josh White for Sharecast.com.
48.49 (0.48%)
0.00