European shares start August higher on US-Iran diplomacy hopes

Published Tue, Aug 4, 2026 · 05:51 AM

EUROPEAN shares started the month higher on Monday as oil prices fell sharply on hopes for renewed diplomatic efforts to end the Iran war, while AstraZeneca sank on reports of merger talks with US rival Bristol Myers Squibb.

The pan-European Stoxx 600 index closed up 0.5 per cent at 652.09 points and hovered near a record high it clinched on Friday. Most major regional bourses ended higher but London’s FTSE was the only outlier and inched down 0.1 per cent.

Stocks “rock from positive to negative on a near daily basis because again we’ve got oil prices back down again because President Trump has signalled a more diplomatic tone. But you just don’t know what the next week will bring,” Lauren Hyslop, investment manager at Mattioli Woods, said.

Oil futures slid more than 4.5 per cent. Trump’s decision to hold off on a fresh attack on Iran, while seeking a rapid agreement to curb Teheran’s nuclear ambitions and reopen the Strait of Hormuz, eased fears of further supply disruptions.

However, Iran said there were no talks under way with Washington and no plans for any meetings.

The fall in crude prices boosted oil-sensitive sectors with travel and leisure gaining 0.6 per cent. Aerospace and defence stocks were the strongest sectoral performers, rising 2.7 per cent.

M&A activity also commanded investors’ attention, as markets assessed a fresh batch of deal announcements and reports of potential tie-ups.

AstraZeneca shares tumbled 9 per cent, at the bottom of the Stoxx 600 index, after reports of a possible US$400 billion merger of the European pharmaceutical giant with US-based Bristol Myers Squibb. The broader healthcare sector dropped 1.7 per cent.

“It’s not a great thing for the UK market because AstraZeneca is one of our biggest companies, if that gets taken out and it’s taken on by a US company, that’s another major UK company that’s gone from the market,” Hyslop said.

The Stoxx 600 added more than 1 per cent in July, with resilient earnings helping investors look past the economic fallout from the US-Iran conflict.

The turmoil had pushed Brent crude above US$90 a barrel, a particular concern for Europe given the region’s dependence on imported energy.

Prysmian edged 0.6 per cent lower after agreeing to buy US electrical products maker Atkore for US$95 per share in cash, implying an enterprise value of about US$3.8 billion.

Ipsen dropped 8.4 per cent after Jefferies downgraded the French pharma firm to an underperform rating, flagging risks to its Somatuline drug.

Separately, an ECB Economic Bulletin article published on Monday said euro zone household consumption fell sharply in the early weeks of the Iran war as confidence tumbled, underscoring the economic risks of any renewed escalation in the region. REUTERS