European Shares Climb Amid AI Optimism and Geopolitical Tensions

European shares saw gains as optimism around artificial intelligence countered worries over U.S.-Iran peace talks and an impending U.S.-China summit. The STOXX 600 index rose by 0.4%, powered by Britain's unexpected economic growth while concerns about higher oil prices and inflation persisted.

European shares saw an uptick on Thursday, fueled by optimism surrounding artificial intelligence, which helped counter balance the apprehension related to a stalemate in the U.S.-Iran peace discussions. Meanwhile, an upcoming high-stake summit between the U.S. and China kept investors on edge.

The pan-European STOXX 600 index rose 0.4% to 614.05 points as of 0703 GMT, following an increase of 0.8% the day before. Trading volumes remained subdued due to several local markets being closed for a public holiday. However, Britain's economy offered a surprise by expanding 0.3% in March, pushing the blue-chip FTSE 100 up by 0.2%.

Despite recent stock gains, European equities have yet to return to pre-war levels. Inflation data underscored the impact of rising oil prices on the region, heavily reliant on imports. In response, Philip Lane, the European Central Bank's chief economist, hinted that interest rate hikes may soon be necessary, with markets pricing in two potential increases this year. Luxury brand Burberry saw its shares dip 4% following reports of fourth-quarter sales meeting expectations amid Iran conflict-related dips in tourism and consumer spending.