By Medha Singh
Tehran’s attack on U.S. military bases in Iraq initially raised fears of a wider war in the Middle East, spurring a flight to safer assets and causing the pan-European STOXX 600 <.STOXX> to fall as much as 0.6%.
However, the benchmark index gradually recovered and closed 0.2% higher as Iran said it did not seek to escalate the confrontation.
There were no American casualties in the attack and Tehran appeared to be standing down, U.S. President Donald Trump said in the final minutes of European trading hours, lifting U.S. stock indexes to record highs.
“After a very negative initial reaction to the overnight events in the Middle East, the market seems to be picking up hope that the events provide the sufficient base for de-escalation,” said Ingo Schachel, head of equity research at Commerzbank.
Germany’s DAX <.GDAXI> outperformed regional bourses as the positive geopolitical development overshadowed an earlier data showing an unexpected fall in industrial orders in November in the country.
France’s Airbus <AIR.PA>, among the biggest boosts to the pan-regional index, rose 2% as its U.S. rival Boeing Co’s <BA.N> 737-800 jet belonging to a Ukrainian airline burst into flames shortly after take-off from Tehran, killing all 176 people aboard.
Airbus shares helped the travel and leisure <.SXTP> to lead the charge among European subsectors with its 0.7% gain. On the other hand, Boeing suppliers Senior Plc <SNR.L>, Safran <SAF.PA> and Melrose <MRON.L> slipped between 0.1% and 1.2%.
In Britain, the blue-chip <.FTSE> index lagged its European peers, weighed down by losses in shares of energy giants BP <BP.L> and Royal Dutch Shell <RDSa.L> which tracked oil prices lower.
London’s FTSE 250 midcaps index <.FTMC> was pulled down 0.8% by declines in real estate companies.
Shares of NMC Health <NMC.L> and Finablr <FINF.L> plunged more than 15% each after two major shareholders launched a discounted share sale in the London-listed groups, weeks after NMC was hit by a short-selling attack by U.S. firm Muddy Waters.
(Reporting by Medha Singh in Bengaluru; Editing by Alexandra Hudson)