Europe's STOXX 600 opened at a record high on Monday, with most sectors gaining after the United States and Iran reached a preliminary peace agreement that would open the Strait of Hormuz and end the three-month-long conflict in the Middle East.
Global risk sentiment got a lift and Brent crude prices fell 4% after U.S. and Iranian officials said they had agreed on a framework for a deal, scheduled to be signed on Friday.
The pan-European STOXX 600 index rose 1.2% to 640.94 points by 0711 GMT, surpassing its previous record high hit on February 27. With Monday's gains, the benchmark index reclaimed all of its conflict-related losses.
A majority of sectors advanced, led by a 3.5% gain in auto stocks, while energy price-sensitive airlines such as Lufthansa and Air France jumped more than 5% each. The broader travel and leisure sector hit a record high.
European shares had broadly underperformed their peers in the U.S. and Asia since March, largely due to the continent's reliance on the Strait of Hormuz for crucial oil supplies.
Concerns over energy-driven inflation had the European Central Bank hike interest rates by 25 basis points last week.
Traders continue to anticipate another 25-bp ECB rate hike before the end of the year, according to LSEG-compiled data.
In corporate news, Renault Group gained 5% after the carmaker said it will develop a military vehicle in partnership with defence technology company Thales.
AI equipment maker Schneider Electric climbed 3.3% after entering a strategic collaboration with Taiwan's Foxconn to develop and scale infrastructure for next-generation AI data centres.
Among laggards, energy stocks fell 2.7%, tracking lower crude prices.
