European Stocks Climb as U.S. and Iran Cease Military Actions, Triggering Oil Price Drop

European markets surged Monday after both the U.S. and Iran agreed to pause their military operations over the weekend. This unexpected development knocked oil prices down by around 6%, easing inflation worries and boosting investor confidence.

The STOXX 600 index climbed nearly 1%, reaching levels not seen since early July. Germany’s DAX led with a 1.3% gain, while France, Italy, and Spain each rose about 0.9%. London’s FTSE 100 added 0.4%.

Brent crude oil prices tumbled to roughly $90 per barrel after Washington halted its bombing campaign and Iran pledged to do the same if the U.S. maintained the pause. The sharp decline in oil costs provided relief to energy-dependent regions like Europe and Asia, which had been grappling with inflationary pressures.

Travel and leisure sectors jumped on the news, with shares rising 2.3%. Airlines such as Lufthansa, IAG, and Ryanair saw their stock prices climb roughly 3% each, helped by the prospect of lower fuel expenses.

Meanwhile, energy stocks slid 2% and became the worst performers on the STOXX 600. UBS analysts cautioned that risks remain elevated, noting that if military tensions resume, oil prices could retest the highs seen earlier this year.

Central Banks and Earnings in Focus

This week is packed with key events on multiple fronts. The Federal Reserve, Bank of England, and Bank of Japan all have policy meetings scheduled. Markets generally expect the Fed to keep rates steady for now but price in a potential rate hike by the end of 2026.

Investors will also scrutinize Fed Chair Kevin Warsh’s remarks on Wednesday for insight into future moves amid recent market swings. The Bank of England's decision draws attention as UK inflation eases to 2.6%.

On the corporate side, major tech giants like Microsoft, Meta Platforms, Amazon, Apple, and Qualcomm are reporting earnings this week. The sector’s European peers followed suit Monday, with the STOXX 600 technology index surging 2.4% and SAP jumping 5.5%.

European companies also grabbed the spotlight. AstraZeneca’s shares rose 1.3% after beating profit forecasts and reaffirming 2026 targets. Vodafone climbed 4% following an improved outlook tied to its Safaricom acquisition. Pharos Energy’s stock shot up 25% after Serica agreed to acquire it, while Pinewood gained 3%.