By Avinash P
March 31 (Reuters) – European stocks extended gains on Tuesday on hopes of easing Middle East tensions, but concerns over the war’s economic impact kept the benchmark on track for its sharpest monthly decline since 2022.
The pan-European STOXX 600 index was up 0.6% at 584.3 points by 0850 GMT. The index, down 7.8% in March, is set to snap an eight-month run of gains and post its first quarterly decline in five.
All major regional bourses rose but remained on track for monthly losses. Swiss stocks gained about 1% after UBS Securities upgraded the index to “attractive”, citing valuations after a more than 10% drop from its peak.
UBS shares climbed 3% after the Financial Times reported Swiss lawmakers had assured the lender they would ease rules, allowing it to raise its capital requirement by $22 billion.
The move lifted financial services stocks 1.3% and led sector gains.
Despite falling 0.5% in the session, energy shares were set to gain 14% in March and was the only sector in green this month tracking a historic surge in crude prices.
Investor sentiment was lifted on Tuesday after The Wall Street Journal reported that U.S. President Donald Trump told aides he is willing to end the military campaign against Iran even if the Strait of Hormuz remains largely closed.
“We’re in oversold condition and then that coupled with this element of potentially encouraging news has helped to shape the bounce that we’re seeing today,” said Fiona Cincotta, senior market analyst at City Index. She cautioned, however, that the move should be treated carefully.
“We’ve seen this numerous times in recent weeks where there’s a comment from Trump which has been encouraging only for that optimism to fade once again.”
European equities started March near record highs but fell sharply as the U.S.-Israel conflict with Iran disrupted oil supplies, lifted crude prices and weighed on growth and inflation expectations.
With no clear end to the conflict, the closure of the Strait of Hormuz has worsened supply disruptions and pressured sentiment, given Europe’s reliance on energy imports.
Higher energy costs have shifted rate expectations, with investors now pricing in two European Central Bank hikes by end-2026.
As the quarter ends, multiple shocks have weighed on markets, including geopolitical tensions and rising concerns over AI-driven disruption. The STOXX 600 is set to finish the quarter down about 1.3%.
Investors await the eurozone’s flash consumer prices reading later in the day, the first of its kind since the inception of the Gulf conflict, to gauge the war’s impact on the region’s economies.
Among other movers, Unilever added 0.8% after the conglomerate said it was in advanced talks to combine its food business with spice maker McCormick, which would land the consumer giant roughly $15.7 billion in cash.
Alstom shares jumped 4.3% after the train maker said it won a $800 million share in multinational systems contract in the AMECA region.
(Reporting by Avinash P in Bengaluru; Editing by Rashmi Aich and Nivedita Bhattacharjee)
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