By Ragini Mathur
April 21 (Reuters) – European shares were subdued on Tuesday as uncertainty over future oil supplies kept risk appetite restrained even as possible peace talks between the U.S. and Iran gathered momentum ahead of a looming ceasefire deadline.
The pan-European STOXX 600 index was up 0.1% to 622.17 points as of 0828 GMT.
Major regional bourses also inched up, with Germany’s DAX and London’s FTSE 100 adding 0.6% and 0.2%, respectively.
Despite Iran’s earlier reluctance to participate in another round of talks, a Pakistani official involved in the negotiations revealed to Reuters that there was momentum for discussions to resume Wednesday.
The STOXX 600 now hovers just 2% below its all-time high reached on February 27, buoyed by growing optimism that the Middle East conflict may be nearing resolution.
However, persistent concerns over potential oil supply disruptions continue to cast a shadow over Europe’s energy-dependent economies, with numerous companies highlighting conflict-related challenges in their quarterly reports.
Kathleen Brooks, research director at XTB, noted that investors were reluctant to price in the worst-case scenario to the conflict as they remained optimistic that the ceasefire would be extended.
“Price action suggests that investors see the inflationary impact from the energy price shock as temporary, but if the situation does not de-escalate soon, then inflation risks may come back and bite market participants.”
Among sectors, technology was leading the board, up 0.8%. Financial shares edged up, with insurance and banking sectors rising 0.6% and 0.4%, respectively.
At the bottom of the benchmark was the healthcare index, down 0.6%.
Aerospace and defence index dropped more than 1%, with Europe’s largest defence technology group Thales falling 3.7% after first-quarter sales missed analyst forecasts.
Food and beverages index fell 0.9% after Royal Unibrew plunged 20.3%, on track for its worst day since February 2009 . The Danish beverage company said its partnership with PepsiCo in northern Europe was to end.
On the monetary policy front, European Central Bank President Christine Lagarde said on Monday that the economic implications of the war in Iran have yet to reach levels corresponding to the ECB’s adverse scenario.
Markets currently price in an 84% probability that the central bank will maintain current interest rates at next week’s meeting, according to LSEG data.
(Reporting by Ragini Mathur in Bengaluru; Editing by Janane Venkatraman)
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