The pan-European STOXX 600 was up 0.61% at 628.93 points, as of 0712 GMT, trading just shy of a record high touched in late February, just before the Middle East war erupted.
Most sectors traded higher, led by banks with a 1.7% jump, while regional airlines such as Lufthansa and Air France KLM gained 4.2% and 9%, respectively, as Brent crude prices slid 5% to $98 a barrel.
While U.S. President Donald Trump has warned that he was in no hurry to finalise a deal with Iran, investors seem to rely more on his Saturday statement that Washington and Iran had “largely negotiated” a memorandum of understanding on a peace deal that would reopen the Strait of Hormuz.
Clarity remains limited on key issues dividing the adversaries, including Iran’s nuclear programme.
One-fifth of the world’s crude oil and natural gas passes through the strategic waterway and is also key for energy-dependent Europe. The STOXX 600 has lagged global peers on worries that higher crude prices could fan inflation pressures in the region.
Among single stocks, Delivery Hero jumped 12% after a report said Uber’s board met on Saturday to discuss raising its offer for the German food-delivery group, following a rejection by a major shareholder of a bid valuing the company at more than 11.5 billion euros ($13.39 billion).
Trading volumes are expected to be light as markets in the U.S. and UK are closed on account of public holidays.