European stocks jump 2% as sliding oil prices buoy sentiment

European stocks opened notably higher on Tuesday, as traders watch developments in the Middle East and reduced but still elevated oil prices.

By 2:15 p.m. in London (10:15 a.m. ET), the pan-European Stoxx 600 was 1.3% higher, with most sectors in positive territory. The Stoxx Europe Oil and Gas index recovered from earlier losses in the day to trade flat.

The rebound put the regional Stoxx 600 index on course to snap a three-day losing streak, and set it on course to claw back some of last week’s near 6% loss that came as global sentiment was shaken by the U.S.-Iran war.

Airline stocks staged a broad recovery on Tuesday as the falling oil price eased concerns over jet fuel. Lufthansa and Air France were recouping Monday’s losses, rising 6.5% and 3.3% respectively.

Global sentiment improved, with Asia-Pacific markets rebounding and U.S. stock futures up ahead of the opening bell.

Those moves came after oil prices pared gains after U.S. President Donald Trump told a CBS News reporter that “the war is very complete, pretty much,” but also signalled a readiness to act to keep the vital oil passage, the Strait of Hormuz, open.

Trump said he was considering seizing control of the strait, saying Iran would be hit harder if it did anything to stop oil flows through the strategic sea passage.

Oil prices plunged as much as 10% overnight after Trump’s comments, but remain elevated: Brent crude was down around 7.3% at $87.79 per barrel as of 2:15 p.m. London time on Tuesday. U.S. crude oil was also down 7% at $88.09 per barrel. The declines come after oil surged past $100 on Monday.

A spokesperson for Iran’s Ministry of Foreign Affairs told CNBC on Monday that oil tankers transiting the Strait of Hormuz “must be very careful.”