Europe midday: Shares rebound as Trump suspends threat on Iranian power plants

(Sharecast News) - European shares rebounded at midday on Monday as US President Donald Trump U-turned on his latest threat to attack Iran's energy infrastructure, although the oil price remained above $100 in a sign investors remained sceptical about the authoritarian leader's erratic policy on the war. The pan-regional Stoxx 600 index reversed morning losses to be 0.95% higher at 578 by 1223 GMT. Germany's DAX rose 1.59%, France's CAC 40 1.27%, Italy's MIB 1.39% and Spain's IBEX 1.55%.

Benchmark crude oil fell 5.38% to $105.7 a barrel and West Texas Intermediate 5.91% to $92.41. Trump claimed he was withdrawing his threat for five days after discussions with Tehran, but Iran's Fars news agency has quoted an unnamed source as saying there has been "no direct or indirect connection" between the two countries.

Saxo UK strategist Neil Wilson said: "Stocks have staged a monster rally off the lows after President Trump signalled the US and Iran have had 'very good and productive conversations' over 'total resolution' of hostilities, and that the US would postpone all military strikes against Iranian power plans and energy infrastructure for five days."

"He posted on Truth Social but I would treat this with caution and it seems to already be refuted by Iran...it takes two to TACO remember," Wilson added in a reference to the "Trump always chickens out" label given to the president's many U-turns.

"Markets are increasingly pricing not just energy disruption but long-term higher inflation and slower growth combined with a central bank policy mistake, lower liquidity, tighter financial conditions and so on."

IG analyst Chris Beauchamp said Trump's move still left "big questions unanswered - Hormuz remains closed, the damage to energy infrastructure is still there and it is unclear whether airstrikes on other targets will continue".

"While this was the headline investors have been hoping for, the fact that Brent has rebounded back above $100 shows that markets remain sceptical."

Iran responded to Trump's increasingly bellicose language over the weekend by firing missiles and drones at neighbouring targets and threatening to lay sea mines to block the entire Gulf if its coasts or islands are attacked.

"Any attempt by the enemy to attack Iranian coasts or islands will naturally, and in accordance with common military practice, cause all access routes and communication lines in the Persian Gulf and the coasts to be mined with various types of naval mines, including floating mines that can be released from the coasts," the country's defence council said in a statement released by the State Fars news agency.

"In that case, the entire Persian Gulf will practically find a situation similar to the strait of Hormuz for a long time. This time, along with the strait of Hormuz, the entire Persian Gulf will be practically blocked, and the responsibility for it will lie with the threatening party."

Morning share prices followed a slide in Asian markets as the key Strait of Hormuz remained blocked to most shipping and Trump on Saturday warned he would "obliterate" Iran's power plants if Iran didn't reopen the waterway within 48 hours.

In equity news, Telecom Italia jumped as state-controlled postal service Poste Italiane tabled a €12.50bn offer for the company.

Reporting by Frank Prenesti for Sharecast.com