European shares gain ahead of key central bank decisions

Investors await policy signals from the Federal Reserve and ECB

European shares edged up on Tuesday, extending a calm start to the week, as investors battered by a selloff amid the Middle East conflict awaited key central bank signals to help them assess fresh bets.

Equities in the region remain sensitive to gains in oil prices, with the US-Israel war against Iran and the resulting strain on crude supplies showing few signs of easing. Concerns that high oil prices would stoke inflation could push central banks into a more hawkish stance, analysts said.

The US Federal Reserve and the European Central Bank are scheduled to lay out their policy stances later this week.

"Having reacted late to the energy price shock of 2022, the ECB could be inclined to demonstrate its inflation-fighting credentials and decide on pre-emptive rate hikes," ING economists wrote.

The pan-European up 0.64 percent at 602.31 points. London stocks climbed 0.83 percent , Paris rose 0.49 percent, while Madrid and Milan gained 0.92 percent and 1.22 percent, respectively.

Frankfurt stocks rose 0.67 percent, despite data showing German investor morale declined more than expected in March.

ENERGY, UTILITIES GAIN

The European energy index rose 2.3 percent, with Shell ending 1.7 percent higher in its fifth consecutive session of gains.

Brent crude prices LCOc1 held above $100 a barrel, extending a rally driven by mounting concerns about continued supply disruption in the Middle East as Iran launched fresh attacks on the United Arab Emirates.

Traffic through the Strait of Hormuz remained largely shut, with no clarity on when the vital waterway would be reopened for shipments.

Utilities, a traditionally defensive corner of the market, advanced 1.6 percent.

While widely expected to leave rates unchanged at this week's meeting, the ECB's accompanying statement is likely to be examined closely for clues on future rate decisions.

Markets are currently pricing in at least one ECB rate hike before the end of the year, according to LSEG data. However, " volatility in rate expectations can last, " said Joost van Leenders, senior investment strategist at Van Lanschot Kempen.

"If oil spikes again to $110, you could see expectations move back to two ECB hikes. If oil prices ease and flows resume through the Strait of Hormuz, expectations could shift back to no hikes."

Among notable movers, Springer Nature advanced 12.8 percent after the German publisher forecast a better-than-expected 2026.

Sartorius Stedim Biotech added 8.9 percent after the pharma group set new mid-term growth targets, while its German parent Sartorius advanced 8.2 percent.

Fraport rose 5.9 percent after the airport operator said it expects a slight increase in 2026 earnings.