European shares near record high as lower oil prices boost sentiment

Europe's benchmark STOXX 600 edged higher on Tuesday, hovering near a record high as falling oil prices and easing concerns over a possible military escalation between ‌the United States and Iran boosted risk appetite. The STOXX 600 index gained 0.67% to 660.96 by 0941 GMT, with benchmark indexes in Germany, France and Italy each rising about 1%. Banks led sectoral gains, up 2.6%.

The pan-European benchmark was trading within 1% of its record high, last reached in early August, on renewed hopes ‌that easing Middle East tensions could curb energy-driven inflation worries and dampen expectations for higher interest rates. While it was not the first time investors had ‌been promised a swift end to the conflict, Democrats' sweep of the US Congress during midterm elections last week raised hopes for an imminent resolution.

Brent crude fell more than 2% to $90 a barrel after Trump said he would hold off on bombing Iran. That boosted airlines such as Lufthansa and Air France-KLM , each up 1%. The travel and leisure sector is the best performing ⁠this month. "There ​were concerns that he was going ⁠to go all out before the end of the year. The way the Congress is set up now that is not likely going to be the case and there potentially is ⁠going to be a better framework towards a resolution in the near future," Daniela Hathorn, senior market analyst at Capital.com.

A stronger-than-expected corporate earnings season has also underpinned the rally, with ​the region's lower exposure to AI stocks further supporting gains amid uncertainty surrounding the sector. The earnings growth gap between Europe and the US ⁠narrowed to its smallest level in more than three years this reporting season, while Europe matched or outperformed the US in six sectors, Deutsche bank said. Third-quarter earnings are expected to rise 25%, from ⁠a ​previous estimate of around 16%, per LSEG data.

Infineon added 6.6% after the chipmaker forecast revenue growth of more than 20% in 2027 and a roughly five-percentage-point increase in profitability. The optimism also aided other chip stocks, including Soitec up 5.6% and Aixtron up 3.5%.

Potash producer K+S gained 2.3% after beating third-quarter earnings expectations. Edenred ⁠rose 4% after a court judgement showed that a Brazilian judge suspended part of new meal voucher rules for companies in a local lobby group, ⁠including Pluxee and Edenred's Ticket.

Oil stocks were ⁠laggards, down 1.1%. Meanwhile, investors anticipate the European Central Bank to wait for more data through year-end and potentially hike rates by February next year.

Later in the day, the focus will be on the US inflation report that could help ‌determine the outlook for ‌US interest rates.