European stocks closed the week near record highs, with the Stoxx Europe 600 Index climbing 1.9% and approaching February's pre-war peak. The rally came as Brent crude fell nearly 4% to around $87 a barrel, driven by speculation that a US-Iran agreement to reopen the Strait of Hormuz could be imminent. Travel and banking shares led gains, while energy stocks were the sole sector in negative territory.

Travel and leisure companies outperformed significantly, with TUI AG and International Consolidated Airlines Group SA both rising more than 7%. Traders monitored conflicting signals, as President Trump claimed a deal was near while Iranian officials stated no conclusion had been reached. The week also featured SpaceX's historic $75 billion IPO, instantly making it one of the world's largest public companies.

ING Groep NV strategist Vincent Juvyns called it a 'rollercoaster week' but noted improving sentiment around AI investments and the SpaceX debut. He said 'many investors fear missing out' on momentum plays. Meanwhile, ECB Governing Council member Joachim Nagel indicated policymakers stand ready to raise rates again next month if Middle East tensions warrant additional action.

The ECB's rate hike marked its first increase since 2023, making it the first major central bank to respond to inflation pressures from the Iran conflict. This positions European markets at a crossroads between geopolitical optimism and monetary tightening risks.