European stock markets surged to multi-week highs as investors reacted to signs of progress in U.S.-Iran peace talks that could reopen the critical Strait of Hormuz Reuters. The pan-European STOXX 600 index closed 1% higher at 631.63, nearly erasing losses endured during the recent conflict US News & World Report.
This market rally followed news that an agreement between the U.S., Iran, and regional powers is close, with the potential for the Strait of Hormuz to reopen Finance Yahoo. The strait, closed since early 2026 due to escalating tensions, is a vital channel for global oil shipments. Its closure had caused oil prices to spike and heightened volatility in global markets, especially in energy-dependent Europe AP.
As diplomatic efforts intensified throughout April and May, both sides engaged in indirect negotiations, with international mediators facilitating dialogue The Guardian. Recent statements from U.S. and Iranian officials signaled progress toward a memorandum of understanding, fueling market optimism Reuters.
Oil prices responded swiftly, dropping to their lowest levels in two weeks as traders bet on resumed crude shipments through the region The Guardian. U.S. and European equity indices both posted strong gains, with the S&P 500 also rising 1.5% for its best day in nearly a month AP.
While some Iranian military leaders remain skeptical about the immediate reopening of the strait, central banks in Europe have welcomed the easing tensions, anticipating it will help stabilize inflation and support economic growth Reuters.
As talks continue, global markets are watching closely for confirmation of a formal agreement and the actual reopening of the Strait of Hormuz.