European equities advanced on Tuesday after stronger-than-expected German economic data and a sharp decline in oil prices improved investor sentiment.
The German benchmark DAX rose nearly 1% to 26,324 points by midday, while the Euro Stoxx 50 gained more than 0.5% to 6,485. Futures for major U.S. indexes also pointed higher. The gains followed a revision to Germany’s second-quarter GDP, which expanded by 0.3% quarter-on-quarter, up from an earlier estimate of 0.2%. The revision reflected stronger-than-anticipated exports despite ongoing geopolitical risks tied to the Iran conflict.
«The German economy has shown surprising resilience given the dark outlook amid the Iran war,» said Thomas Gitzel, chief economist at VP Bank. Corporate sentiment also improved, with the Ifo Business Climate Index rising for a fourth consecutive month in August to 88.8 points. The index now exceeds pre-conflict levels recorded at the end of February and surpasses analyst expectations.
Volkswagen’s shares slipped 0.7% after CEO Oliver Blume reiterated cost-cutting plans amid pressure from U.S. tariffs, geopolitical risks and new competitors. Blume said the closure of four German plants was not a foregone conclusion, but stressed the need to create «reliable prospects» for all sites. More than 10,000 employees reportedly responded with boos during his speech at the Wolfsburg plant. Separately, Gerresheimer’s stock fell over 6% after Uwe Röhrhoff announced his early departure as CEO, less than a year after his return.
Gains were led by Siemens Energy, which rose about 2% after Bloomberg reported plans to spin off its steam turbine and hydrogen businesses. Defense stocks also outperformed, with Melrose surging 9% after announcing plans to fully resume operations at its California plant by late September following a chemical incident.
Oil prices fell to weekly lows, with Brent crude and U.S. WTI each dropping roughly 3% to $89.56 and $82.50 per barrel, respectively. Analysts cited reduced military escalation risks in the U.S.-Israel-Iran conflict and softer-than-feared U.S. sanctions as key drivers. «The shift from military to economic pressure has eased some of the nervousness in the oil market,» said Ole Hansen, head of commodity strategy at Saxo Bank. The U.S. had threatened expanded sanctions but has not yet implemented them in full, while delaying penalties for countries maintaining business ties with Iran.
Iran responded with threats of retaliation, but mediation efforts led by Pakistan showed progress. Pakistani military officials said significant advances were made in recent talks in Tehran aimed at averting further escalation and reopening the Strait of Hormuz, a critical chokepoint for oil shipments.
