European shares advanced to a two-week high on Wednesday, with oil prices dropping and investor optimism rising after U.S. President Donald Trump cited "great progress" toward a comprehensive peace agreement with Iran.
The pan-European STOXX 600 (.STOXX) gained 1.5% to 618.89, as of 0826 GMT, rising for a second session after ending up 0.7% on Tuesday.
Major regional bourses also rose, with London's FTSE 100 (.FTSE), Spain's IBEX 35 (.IBEX), Germany's DAX (.GDAXI) and France's CAC 40 (.FCHI), gaining between 1.4% and 1.7%.
Energy-dependent Europe has lagged major global markets that have hit record highs this year, driven by artificial intelligence-led optimism, amid lingering concerns about the impact of higher oil prices on growth and inflation.
"These increasing energy prices are waiting on European growth, and this is why the market is still concerned about the consequences of the energy shock on the European environment, and the capability of the corporates to absorb these shocks," said Mabrouk Chetouane, head of global market strategy at Natixis.
"Earnings are clearly growing much faster in the U.S. than in Europe. Only a 2.3% increase is expected for this quarter, which is quite low compared to the U.S."
The healthcare index (.SXDP) added 1.8% aided by Novo Nordisk's (NOVOb.CO) 7.5% gain after the Wegovy-maker raised its full-year outlook.
Banks (.SX7P) and Industrials (.SXNP) were up 2.7% and 1.7%, respectively.
Defence shares (.SXPARO) added 2.4%. Italy's Leonardo (LDOF.MI) gained 2.8% after reporting higher first-quarter earnings, while Norway's Kongsberg (KOG.OL) jumped 6.3% after its order intake more than doubled for the quarter.
British banks Natwest (NWG.L), Barclays (BARC.L), Standard Chartered (STAN.L), and Lloyds (LLOY.L) rose between 3.1% and 4.6%.
The automobile index (.SXAP) rose 3.1%. BMW (BMWG.DE) surged 5.6% after the German carmaker maintained its full-year outlook despite posting a steep drop in its first-quarter pretax profit.
PMI data showed that Eurozone services activity contracted for the first time in almost a year in April, hit by weakening demand amid the Middle East war, which weighed on consumer-facing sectors.
Among other movers, Diageo (DGE.L) was up 4.8% after the world's top spirits maker posted a surprise growth in quarterly organic sales.
Equinor (EQNR.OL) fell 5.4% after the Norwegian energy group reported a bigger-than-expected rise in first-quarter profit and is already up 62% year-to-date due to higher energy prices.
