European Stocks Head Higher on US-Iran Deal Hopes

European stocks advanced on Tuesday, with the STOXX 50 climbing 0.9% and the STOXX 600 gaining 0.6%, recovering from modest losses in the previous session. Investor sentiment improved on renewed hopes of a ceasefire between the US and Iran. Both countries are reportedly considering another round of negotiations after weekend talks ended without an agreement, aiming to resume discussions before a two-week ceasefire expires. Meanwhile, President Trump has initiated a US naval blockade of the Strait of Hormuz. Oil prices have eased slightly but remain at elevated levels. Also, the earnings season is getting underway, with Kering edging up 0.5% ahead of its quarterly results due later today. ASML Holding jumped 2%, Siemens gained 2.2%, Banco Santander rose 1.7%, and Mercedes-Benz advanced 1.8%. In contrast, LVMH shares fell 2.4% after the company’s results disappointed investors, with the luxury group noting that the conflict with Iran had reduced group sales by at least 1%.

European equity markets were set for a stronger open on Tuesday as optimism grew that the US and Iran could resume negotiations aimed at securing a longer-term ceasefire. President Donald Trump said Tehran had reached out to Washington just hours after the US imposed a naval blockade on Iranian oil shipments in the Strait of Hormuz. Oil prices moved lower, easing inflationary pressures and reducing expectations that central banks will maintain or further tighten interest rate policy. In Europe, investors are set to monitor German wholesale price data and Spanish inflation figures, alongside corporate earnings from companies including BMW, Kering, and Publicis. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were up 0.4% and 0.2%, respectively.

European stocks trimmed earlier losses but still closed in the red on Monday as the escalating conflict between Iran and the US prolonged concerns of tight energy supply from the Middle East. The Eurozone's STOXX 50 dropped 0.4% to 5,904 and the pan-European STOXX inched down 0.2% to 614. US President Trump stated that the US would impose a blockade on the Strait of Hormuz, adding to the conflict following unsuccessful talks between Tehran and Washington. Meanwhile, markets were also digesting political developments in Hungary, where Peter Magyar won the election and is set to become the next prime minister, ending Prime Minister Orban's Eurosceptic 16-year tenure. Banks pulled back as yields rose, with Societe Generale, Santander, and BNP Paribas dropping close to 1%. Meanwhile, LVMH dropped 0.4% ahead of its first quarter revenue posting after the bell.