European stocks rise as US-Iran diplomacy hopes ease oil prices

European equities advanced on Tuesday as a pullback in oil prices and optimism around diplomatic efforts to de-escalate the US-Iran conflict lifted investor sentiment across the region.

Oil Retreat and Diplomatic Hopes Drive Gains

The Stoxx Europe 600 rose 0.3% as Brent crude traded around $91 a barrel, down from Friday's high of $95. The decline in energy prices followed reports that Pakistani Army Chief Munir conveyed an offer from the United States to Iran to halt its naval blockade in exchange for the reopening of the Strait of Hormuz and a cessation of proxy attacks, according to Al Arabiya sources. Pakistan reported "significant progress" in the high-level diplomatic talks held in Tehran, and the New York Times reported that the US was considering returning diplomats to Middle Eastern embassies as soon as this week.newsquawk+1

The easing in oil prices offered relief from inflation concerns and bond-market pressures that had weighed on European markets in recent sessions.bloomberg

German Data Surprises to the Upside

Stronger-than-expected German economic data added to the positive tone. The Ifo Business Climate index came in at 88.8 in August, beating expectations of 87.2, while Germany's final Q2 GDP reading was revised up to 0.3% quarter-on-quarter growth, above the expected 0.2%. The data painted a hawkish backdrop for the European Central Bank, which is already contending with elevated natural gas prices near EUR 68/MWh.newsquawk

Sector Movers

Industrials led the session's gains, buoyed by Melrose, which jumped 8% after announcing that a criminal probe into its GKN unit had ended without charges. Siemens Energy rose 1.5% on reports it is working with Goldman Sachs The Goldman Sachs Group, Inc. ↘ 0.36% to field offers for a majority stake in its steam turbines business. Autos lagged at the bottom of the sector rankings.newsquawk

US equity futures also traded higher, with the Nasdaq 100 gaining around 0.7% ahead of the American open, as lower yields complemented the energy-driven risk appetite. Markets now await Iran's formal response to the US proposal, with Tehran said to be consulting before submitting its reply.newsquawk