Even though officials on both sides have publicly downplayed expectations of an imminent breakthrough, markets reacted strongly to speculation that a framework deal may be taking shape—particularly one linked to easing restrictions around the Strait of Hormuz, a critical global energy route.
By the end of trading in Dublin, the tone was firmly upbeat. European equities climbed to their highest level in more than two months, while Ireland’s benchmark Iseq 20 index closed at its strongest point since February 9, before the regional conflict escalated.
Ryanair leads aviation rebound after weeks of pressure
Airlines were among the biggest beneficiaries of the rally, with Ryanair jumping 3.6pc in late Dublin trading to €25.21. The stock has now gained 9.3pc over the past five days and 10pc in a month, though it remains roughly 7pc below levels seen six months ago.
The rebound follows a period of weakness driven by investor concerns over fuel costs, geopolitical uncertainty, and margin pressure across the sector.
Chief executive Michael O’Leary recently described the stock as a “bargain,” while also warning about cost pressures if conditions persist. He added that “there will be lots of upsides in those numbers if the Strait of Hormuz reopens and oil prices settle back.”
That expectation—lower oil prices easing fuel bills—helped fuel Monday’s rally after crude dropped around 5pc.
Banks and wider European equities join the rally
Financial stocks also benefited from the improved sentiment. In Ireland, AIB Group rose 1.78pc, while Bank of Ireland gained 2.16pc, reflecting broader optimism about economic stability if energy costs remain contained.
Across Europe, airline stocks surged in tandem. International Consolidated Airlines Group—owner of Aer Lingus, British Airways, Iberia and Vueling—climbed 3.8pc in Madrid trading.
Chief executive Luis Gallego had earlier warned that higher fuel prices could add about €2bn to its costs this year, weighing heavily on profitability if sustained.
Other carriers also moved higher, with easyJet expected to extend gains after rising 5.7pc last Friday, while Wizz Air added about 3pc. In Germany and France, Lufthansa rose 3.7pc and Air France-KLM surged 7.7pc.
Oil route optimism drives energy and inflation expectations
Markets were heavily influenced by speculation around the Strait of Hormuz, through which roughly one-fifth of global oil and gas shipments typically pass.
US President Donald Trump said on Saturday that a framework to reopen the waterway had been “largely negotiated,” though major sticking points remain unresolved.
Analysts cautioned against assuming a full agreement is imminent. “Contentious issues like Iran’s nuclear plans, its uranium enrichment and the control of the Strait of Hormuz remain potential obstacles,” said Kyle Rodda, senior financial market analyst at Capital.com.
He added: “The ‘deal’ could be little more than an extended ceasefire… to kick the can further down the road.”
Despite the uncertainty, investors reacted by selling oil, with crude prices falling sharply and European natural gas futures extending declines.
Broader market lift, but risks remain
The pan-European Stoxx 600 index rose 0.67pc to 629.28 points, edging close to its record high reached in February, before regional conflict escalated.
Most sectors traded higher, led by banks and airlines, while defence stocks gained around 1.5pc amid ongoing tensions in Ukraine.
Elsewhere, Delivery Hero jumped 11pc to an 18-month high after reports suggested Uber may be reconsidering its approach to acquiring or investing in the German food delivery group following a rejected bid valued above €11.5bn.
TAP narrows losses but flags fuel pressure ahead
In Portugal, state-backed carrier TAP Air Portugal reported that its first-quarter loss narrowed by 63pc to €40m, supported by higher revenues. However, the airline warned that rising fuel prices linked to the Iran conflict could weigh on performance in the coming quarters.
The airline said it expects some mitigation through capacity management, cost controls, and pricing adjustments, including fuel surcharges.
Outlook: inflation data and interest rates in focus
Investors are now turning attention to upcoming inflation figures across major eurozone economies, which will help shape expectations for European Central Bank policy.
Markets currently anticipate two 25-basis-point rate cuts before year-end, according to LSEG data, but the trajectory will depend heavily on energy prices and inflation trends in the months ahead.
For now, however, sentiment remains driven by geopolitics—specifically whether diplomacy can cool tensions fast enough to keep oil prices subdued and extend the rally in risk assets.