Europe midday: Shares rally as Trump hints at Iran exit ramp

(Sharecast News) - European shares rallied by midday on a report that US President Donald Trump was ready to exit his war of choice against Iran even if it meant the continued closure of the vital Strait of Hormuz.

The pan-regional Stoxx 600 index was up 0.61% to 584.28 at 1207 GMT. Germany's DAX and the UK's FTSE made gains of 0.9% and 0.71% respectively, while Italy's MIB fell rose 0.48% and France's CAC 40 0.44%.

A report in the Wall Street Journal stated that Trump had told aides he was willing to end the military campaign even if the Strait of Hormuz remains largely closed, likely extending Tehran's firm grip on the key waterway and leaving a complex operation to reopen it for a later date.

The US leader continues to send confusing signals on how he plans to end the war. His latest threat on Monday to "obliterate" the country's energy infrastructure was issued as a warning to Tehran to agree to peace terms "shortly", despite his claims of diplomatic progress towards a ceasefire.

Meanwhile, Iran on Tuesday attacked a fully loaded Kuwaiti crude oil tanker off Dubai, although response teams contained the incident with no oil leakage and no injuries were reported.

Oil prices are firmly on track for a record monthly rise. Brent crude, which almost hit $117 on Monday, was up 2.22% to $115 a barrel, while US benchmark West Texas Intermediate gained 1.85% to $104.78

"Reports that Trump is willing to conclude the campaign against Iran despite their control of the Straits of Hormuz does signal a willingness to deescalate to avoid a 'forever war' in the Middle East," said Scope Markets analyst Joshua Mahony.

"While European indices are climbing, yesterday's session should serve as a reminder of the danger for bulls. The buildup of US troops in the region highlights the potential escalation ahead, and thus much of Trump's commentary has been chiefly aimed at calming markets to buy himself more time."

"As such, while we are seeing a welcome period of strength this morning, it pays to remain sceptical given the fact that every such rally has preceded a new low."

In economic news, eurozone inflation jumped to 2.5% in March, as rising oil and gas prices pushed it ahead of the European Central Bank's 2% target, according to official flash estimates published on Tuesday.

The rate compared with a figure of 1.9% in February. Energy costs are expected to have risen by 4.9% in March, the EU's stats agency Eurostat said, compared with a 3.1% fall in February.

In Germany, retail sales fell an unexpected 0.6% in February compared with estimates of 0.3% growth, official data showed on Tuesday indicating households were already cutting discretionary spending before the US and Israel started their war on Iran.

On the equities front, consumer goods giant Unilever confirmed it was in advanced talks to combine its food business with spice maker McCormick in a deal that would create a new food conglomerate worth $60bn, including debt.

UBS shares were higher after the Financial Times reported that Swiss lawmakers had told the lender they would ease rules, allowing it to raise its capital requirement by $22bn.

Reporting by Frank Prenesti for Sharecast.com