European equity markets opened the week with a stronger tone after the US and Iran agreed an interim framework aimed at reopening the Strait of Hormuz, a development that helped reduce immediate concerns over global energy supply and improved investor appetite for risk assets.
The Strait of Hormuz has been a central pressure point for energy markets, with disruption affecting oil supply expectations, inflation risk and sentiment towards European companies. Before its closure, the route handled around a fifth of global oil supplies, making any credible move towards reopening significant for sectors exposed to fuel costs, consumer spending and industrial margins.
The FTSE 100 opened 53.65 points higher, or 0.5 per cent, at 10,525.37. Mid-cap and smaller growth names showed stronger early momentum, with the FTSE 250 up 1.1 per cent at 23,577.46 and the AIM All-Share rising 2.2 per cent to 804.23. The Cboe UK 100 advanced 0.6 per cent, while the Cboe UK 250 gained 0.9 per cent. Across mainland Europe, the CAC 40 in Paris climbed 1.8 per cent and the DAX 40 in Frankfurt advanced 1.5 per cent.
The broader European picture was also supportive, with the STOXX 600 rising to 638.53 points, surpassing its previous high reached before the outbreak of the conflict. Markets are beginning to price in a lower geopolitical risk premium, although the durability of the shift will depend on whether the agreement is formally signed and implemented.
The agreement is expected to include the reopening of the Strait of Hormuz and the start of 60 days of talks on Iran’s nuclear programme. Officials from both sides are due to meet in Switzerland this week to sign the accord, but the absence of a published text means investors are still dealing with incomplete information.
JPMorgan European Discovery Trust plc is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
