European stocks close higher amid Middle East stalemate

The pan-European Stoxx 600 ticked up 0.8%, the Dax in Germany advanced 0.6%, the CAC 40 in France gained 0.4%, and the FTSE 100 in the U.K. added 0.6%

European stocks closed on the front foot on Wednesday, with an impasse between Iran and the U.S. in focus as U.S. President Donald Trump travelled to China for a summit.

The pan-European Stoxx 600 ticked up 0.8%, the Dax in Germany advanced 0.6%, the CAC 40 in France gained 0.4%, and the FTSE 100 in the U.K. added 0.6%.

The U.S. President is set to meet face-to-face with China’s President Xi Jinping later this week, with the two anticipated to discuss a range of topics such as trade.

But it may be the ongoing war between Iran and the U.S. that will likely receive much of the attention. Analysts have suggested that China, as a major importer of Iranian crude, could be persuaded to act as a guarantor of a lasting peace deal, although some observers have ramped down expectations that such a breakthrough could come from the gathering.

Diplomatic efforts to forge an agreement between Tehran and Washington appear to have stalled. Earlier this week, the U.S. president dismissed an Iranian response to an American peace proposal, describing it as “unacceptable”. Reports have also swirled around whether the U.S. will try to resume strikes against Iran.

Tehran, for its part, has not indicated that it has further plans to continue the peace process.

Crucially, the stalemate means the Strait of Hormuz, a vital waterway at Iran’s southern coast through which nearly a fifth of the world’s oil transits, is effectively shuttered, as it has been for weeks.

Oil prices are well above pre-war levels as a result, placing upward pressure on inflation.