European markets opened higher, supported by growing optimism around potential diplomatic progress between the United States and Iran. Investor sentiment improved as signals of dialogue emerged, even while military tensions in the Middle East remain unresolved.
Donald Trump stated that progress is being made in ongoing discussions with Iran. The decision to delay aggressive actions following the reopening of the Strait of Hormuz further reinforced expectations of a possible de-escalation.
European indices reacted positively at the open. The FTSE 100 rose nearly 0.9%, the CAC 40 gained 1.4%, and the DAX climbed 1.7%. Gains were largely driven by banking and mining sectors, reflecting renewed risk appetite among investors.
At the same time, oil markets moved in the opposite direction. Prices declined as hopes for reduced geopolitical risk increased. Brent crude dropped over 4%, trading around $100 per barrel, while West Texas Intermediate fell more than 3.7%, slipping below $90.
Despite this pullback, energy markets remain highly volatile. The strategic importance of the Strait of Hormuz one of the world’s key routes for oil and liquefied natural gas—continues to drive sharp price swings. Recent reports suggesting that Iran is allowing some vessels to pass through the strait have helped stabilize expectations, at least temporarily.
In the United Kingdom, inflation data showed prices rising 3% year-over-year in February, unchanged from the previous month. However, analysts caution that these figures do not yet reflect the full impact of recent geopolitical developments. The main concern now is whether rising energy costs will feed into broader inflation in the coming months.
Market expectations for interest rates from the Bank of England have shifted significantly, as investors begin to price in the risk of a new inflationary shock linked to energy markets.
Overall, financial markets are balancing between cautious optimism on diplomacy and ongoing uncertainty tied to geopolitical risks. Any concrete progress in negotiations could further support equities, while renewed escalation may quickly reverse sentiment.
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