European stock markets closed higher on July 21, rebounding after three consecutive sessions of losses. Crude oil futures surged following the escalation of military conflict between the United States and Iran, as well as a declaration by Yemen’s Iran-backed Houthi rebels of a naval blockade against Saudi Arabia. Buying centered on energy and resource stocks, lifting major indices across the region.

The STOXX Europe 600 index ended 3.59 points, or 0.56%, higher at 643.19. London’s FTSE 100 rose 61.15 points, or 0.58%, to 10,585.91. Germany’s DAX advanced 164.66 points, or 0.66%, to 25,011.35, while France’s CAC 40 added 23.03 points, or 0.28%, to 8,363.14, with all major benchmarks posting gains.

Against the backdrop of escalating Middle East tensions, Brent crude oil futures breached the $90 per barrel mark. Oil major BP gained 1.4% and Shell rose 1.1%. The FTSE 350 precious metals index surged 4.22%, buoyed by rising gold prices. The STOXX Europe 600 resources index also climbed 1.68%, supported by gains in copper and gold.

Technology stocks also attracted buyers, with the STOXX Europe 600 technology index rising 2.05%. Dutch semiconductor equipment maker ASM International jumped 5.4%, while ASML Holding (ASML) gained 4.8%, leading the broader index higher. Investor attention is focused on this week’s earnings reports from major U.S. tech companies, including Alphabet, as market participants seek to gauge the sustainability of AI-related demand.

In the UK, defense-related stocks advanced after newly appointed Prime Minister Andy Burnham named former Defence Secretary Healey as Chancellor of the Exchequer. Defense equipment firm Babcock International closed 4.1% higher, QinetiQ rose 3.1%, and BAE Systems gained 1.8%. Business outsourcing company Mitie skyrocketed 39.1% following a takeover agreement with a peer. Semiconductor materials maker IQE also surged 30.5% after raising its earnings outlook.

Individual stocks, however, showed mixed performance. Catering services giant Compass Group fell 1.7% despite reporting revenue growth. Swedish mining and smelting company Boliden dropped 5.7% after its latest quarterly profit missed market expectations. Swiss private bank Julius Baer declined 4.0%, while elevator maker Schindler fell 5.4% as sales fell short of expectations. Swiss pharmaceutical giant Novartis Pharma rose 2.0% after its second-quarter core operating profit exceeded market forecasts.

In bond markets, eurozone government bond yields edged higher. Expectations for additional rate hikes by the European Central Bank (ECB) strengthened amid concerns over rekindled inflation driven by rising oil prices. During mid-session trading, Germany’s 10-year bond yield rose more than 2 basis points to 3.175%, hitting its highest level in roughly eight weeks. Germany’s 2-year yield also climbed 1.5 basis points to 2.793%.

The consensus view is that the ECB will hold its policy rate steady at its meeting on July 23, though markets are pricing in a total of approximately 45 basis points of rate hikes by year-end. This implies one 25-basis-point hike and an 80% probability of a second hike.

In currency markets, the euro traded at $1.1400 in late European trading, slightly down from $1.1422 at the close of Asian trading. The dollar was at 163.00 yen, while the euro traded at 185.95 yen.

On the UK economic data front, average wage growth for the March-to-May period remained subdued, matching market expectations. The figures did little to alter the market’s outlook that the Bank of England will keep its policy rate on hold.

Regarding the Middle East situation, some reports indicated ongoing diplomatic efforts between the U.S. and Iran. However, concerns over energy supply disruptions remain persistent, given the view that maritime transport through the Strait of Hormuz is effectively under blockade. Market participants noted that “uncertainty stemming from heightened U.S.-Iran tensions could weigh on corporate earnings outlooks.”