European stocks rose to new record highs on Tuesday, extending gains amid a wave of relief following US President Donald Trump's announcement of an agreement between Washington and Tehran to end the war.
The pan-European STOXX 600 index rose 0.5% by 2:00 PM Saudi Arabia time, soaring to new record highs.
Local markets posted cautious gains, with Germany's DAX index rising 0.5% and France's CAC 40 index climbing 0.7%. Italy's FTSE MIB index jumped 1.2%, while Spain's IBEX 35 index rose 0.3%.
In London, the FTSE 100 index rose by 0.6%. The benchmark British index – which was largely absent from the global rally on Monday – remained constrained by its heavy concentration in energy giants such as Shell and BP, which fell in tandem with the decline in oil prices following the truce.
The lackluster performance of the FTSE 100 index stood in stark contrast to its European and American counterparts, which advanced strongly, although gains were relatively muted in Europe amid fundamental questions still hanging over the promised solution to the conflict in the Middle East, said Dan Coatsworth, head of markets at AJ Bell.
US President Donald Trump announced that a preliminary agreement to end the war between the United States and Iran had been signed, but details remain unknown.
The recent rally has pushed Europe's year-to-date gains to nearly 8%, narrowing the valuation gap with the US S&P 500. While European indices have recovered some of their wartime losses, their gains remain limited compared to their global counterparts.
Unlike the United States and Asia, the composition of European stocks lacks the heavy technology sector needed to fully capitalize on the secular AI boom - the engine that has propelled global markets to record highs even at the height of geopolitical friction.
Analysts point out that the conflict has led to a preemptive increase in interest rates by the European Central Bank, making the next stage of this rise entirely dependent on the resilience of corporate profit margins in an environment characterized by high costs and high borrowing costs.
On the individual stock front, shares of STM Incrulelectronics fell 2.5% following the offering of $1.5 billion in two tranches of convertible bonds.
Puma shares rose 3.3% after HSBC upgraded its recommendation on the German sportswear maker from hold to buy.
Shares in Associated British Foods fell on Tuesday after Citi added the stock to its watch list for negative catalysts.
Shares in Securitas AB fell 3.42% to 149.60 Swedish kronor on Tuesday, after the Swedish security firm unveiled its 2030 strategy targeting average annual earnings per share growth of 10%.
