European shares edged higher on Tuesday, with the pan-European STOXX 600 rising 0.1% to 661.39 points as of 0717 GMT, according to Reuters. The modest gains were primarily driven by energy stocks, which advanced about 1% as oil prices climbed to their highest level so far this month. The energy sector's outperformance came as concerns over potential disruptions around the Strait of Hormuz continued to keep crude prices elevated, with prolonged disruption to the crucial oil-shipping route fueling inflationary pressures and complicating expectations for monetary easing by central banks.
Over the weekend, Iran announced that an agreement with Oman to reopen the Strait of Hormuz was 'very close,' as reported by Stock Market News. However, Iran signaled that a deal wouldn't immediately reopen Hormuz, tempering hopes for a swift restoration of flows that would help Europe replenish its gas stockpiles. Iran said it was nearing a final agreement with Oman on new shipping lanes through the Strait of Hormuz, but indicated that additional conditions involving the United States would need to be addressed before the strategically important waterway could fully reopen, according to Reuters. U.S. President Donald Trump on Monday responded to Iran's conditions for a potential peace agreement with demands of his own, including compensation for people killed in wars, attacks and protests, the escalation in rhetoric could further complicate efforts to reopen the shipping route.
The rise in fuel prices weighed significantly on travel and leisure stocks, which fell 0.7% as investors remained concerned that sustained increases in energy costs could raise operating expenses for airlines and other travel-related companies. Technology stocks provided some support to the broader market, gaining 0.4%, helping offset the pressure from the travel sector. Major Gulf markets reflected investor concerns over the Hormuz deal uncertainty, with regional indices showing mixed performance as the UAE's ADNOC said on Friday that 15 of its vessels had been attacked while transiting the Strait of Hormuz since the conflict began.
Traders are tracking the impact of prolonged supply cuts at Norway's Ormen Lange gas field, according to Stock Market News. The country is Europe's biggest piped-gas supplier, and any disruptions may increase price swings. **Europe's gas storage sites are facing unprecedented challenges, with facilities recently hitting the lowest seasonal levels in records going back to 2009, as reported by Stock Market News. The facilities are currently just below 59% full, falling short of the five-year seasonal norm of 76% for this time of year. Citigroup strategists expect storage levels of about 74% by the end of October if Middle East LNG exports gradually resume as of mid-August.
With the European earnings season nearing its end, corporate developments were relatively limited, shifting investor attention toward macroeconomic data. Markets are set to focus on euro zone employment figures, gross domestic product data and U.S. consumer price inflation figures due later this week, according to Reuters. The data could offer important clues about the strength of economic activity, inflationary pressures and the future direction of interest rates. Among individual stocks, Alcon jumped 5.7% after the Swiss-American eye-care company raised its full-year earnings forecast, standing out in an otherwise relatively subdued European corporate news flow.
