European shares gain on softer US Iran sanctions, falling oil prices

European shares rose on Tuesday as investors took comfort from a softer-than-feared U.S. sanctions package on Iran and falling oil prices, with gains in heavyweight industrials and healthcare stocks lifting the benchmark.

U.S. Treasury Secretary ‌Scott Bessent's fresh measures to stifle Iran economically had limited impact on markets, as Washington stopped short of imposing any penalties on Tehran's trading partners. Iran promised to retaliate against the expanded U.S. sanctions and said it was confident major trading partners would resist Washington's pressure campaign.

The pan-European STOXX 600 closed 0.35% ‌higher at 656.48 points, just 0.6% away from its record high hit earlier this month. The healthcare sector led gains with a 1.2% rise. Novo ‌Nordisk advanced 2.9% after JPMorgan raised its price target for the Danish obesity drug maker, citing increased long-term sales forecasts. Peer Zealand Pharma climbed 5.6%.

Industrials advanced 1.1%, rising the most in three weeks as Melrose Industries climbed 10.4% after the British aerospace components supplier gave a timeline for resuming full production at GKN Aerospace. Production was halted in late May at ⁠a suburban ​Los Angeles plant after an overheating tank ⁠raised fears of an explosion.

Defence and aerospace shares also edged 0.9% higher as a result. Investors also assessed signs of a turnaround in Germany's economy, as gross domestic product grew ⁠faster than expected in the second quarter and business morale hit its highest level in a year in August.

"While it’s still too early to call this a ​self-sustained economic recovery, growth above potential in the first and second quarters of the year, together with four consecutive months of increasing sentiment, ⁠are promising," said Carsten Brzeski, global head of macro at ING. Brzeski warned however that elevated oil prices, a likely upcoming shock from higher gas prices in the next heating season and ⁠renewed ​trade tensions pose risks to the German outlook.

Crude prices fell 3.5% as traders saw little immediate threat to global crude supplies from the latest U.S. measures. Federal Reserve Chair Kevin Warsh's Jackson Hole debut later this week is in focus for clues on rising bond yields ⁠and central bank independence.

Limiting the gains on the benchmark, luxury stocks fell 1.2% as Gucci parent Kering slipped 3.3%. The tech sector rose 0.2% ahead of ⁠Nvidia's results on Wednesday, amid concerns ⁠the chipmaker may struggle to meet lofty expectations.

European software and data stocks ended lower as Alphabet's Google announced its Gemini Enterprise tool for lawyers and law firms. French corporate services firm Capgemini and Amsterdam-listed software maker Wolters Kluwer ‌fell the most, by 1.8% ‌and 3.1%, respectively.