By Ragini Mathur
April 8 (Reuters) – European shares jumped more than 3% on Wednesday as a two-week Middle East ceasefire sparked a relief rally across global markets, raising hopes that oil and gas flows through the Strait of Hormuz could soon resume.
The pan-European STOXX 600 index was up 3.6% at 611.86 points, as of 0834 GMT, and poised for its biggest one-day jump in a year, if the current momentum persists.
Regional markets also mirrored the move, with Germany’s DAX up 4.7%, while London’s FTSE 100 climbed 2.5%.
Market reaction was swift after U.S. President Donald Trump agreed to a two-week ceasefire with Iran, less than two hours before his deadline for Tehran to reopen the Strait of Hormuz, or face devastating attacks on its civilian infrastructure. The Strait of Hormuz is the narrow waterway that typically handles about one-fifth of global oil trade.
Europe’s fear gauge, the STOXX volatility index, fell below 25 for the first time in three weeks.
Beyond the immediate relief, investors are waiting to see whether the truce can pave the way for a lasting resolution.
“Some of the residual risks are still out there,” said Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management.
“Investors should not be surprised if we do see some period of re-escalation in rhetoric, or if some of the energy flows through the Strait of Hormuz perhaps disappoint what people might hope for. But overall, the announcement is a positive development.”
Energy markets responded sharply, with Brent crude futures falling 12.3%, below $100 a barrel, offering some respite after weeks of elevated oil prices. [O/R]
European equities have been under intense pressure since the U.S.-Israel military campaign against Iran erupted on February 28, with the continent’s heavy dependence on oil imports through the largely blocked passage amplifying the pain.
The gains on Wednesday were broad-based, with travel, industrials, and banking advancing between 6% and 7%. They are typically seen as prime beneficiaries of lower energy costs and falling bond yields.
The technology sector jumped 6.2%, underpinned by strong performances among chipmakers. Shares of Infineon, Soitec, ASML and SUSS Microtec were up between 6.5% and 11.3%.
Energy stocks were the sole outliers, down 4%, as crude prices tumbled following reports of the ceasefire. Oil firms BP, TotalEnergies and Equinor dropped between 6% and 12%.
Shell weighed the most on STOXX 600, down 6.5%, after the oil major cut its first-quarter gas production outlook while signalling a surge in oil trading profit and a dent to short-term liquidity.
Traders are currently pricing in two quarter-point rate hikes from the European Central Bank by the year-end, according to LSEG-compiled data.
(Reporting by Ragini Mathur in Bengaluru; Editing by Sherry Jacob-Phillips)
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