The Stoxx 600, which was trading more or less flat at midday, had pushed 0.4% higher to 520.95 by the close as crude prices plummeted to their lowest in a month.

Axel Rudolph, senior technical analyst at IG, said markets were benefitting from "risk-on sentiment" following events in the Middle East this weekend. "Stock indices begin the week on a positive footing as investors are relieved by Israel's muted retaliatory attack on Iran's military installations, avoiding oil or nuclear facilities," Rudolph said.

Crude markets have been volatile in recent weeks on fears that an escalation of conflict might affect supplies from Iran, which accounts for around 4% of global supplies. Brent was down 5.4% at $71.56 a barrel by the close in Europe, while natural gas dropped nearly 10% to $2.314 per million British thermal units.

Stocks on Wall Street started the day on the front foot, with the mood upbeat ahead of the latest quarterly results from five of the Magnificent Seven tech titans, as the S&P 500 and Nasdaq 100 trade close to their record highs.

Alphabet, Microsoft, Meta Platforms, Apple and Amazon.com are all due to report in the coming days, along with a handful of blue-chip economic bellwethers like Ford, McDonald’s, PayPal, Caterpillar, Exxon Mobil and Chevron.

Nevertheless, a number of other key risk events over the coming week could disrupt the latest rally – namely Friday's US non-farm payrolls data, and the US presidential election vote on 5 November.

Meanwhile, in the UK, investors will be closely watching the Labour Party's first autumn budget on Wednesday amid speculation about tax increases, employers' national insurance contributions and changes to stamp duty thresholds.

Philips leads the fallers

Dutch health tech giant Philips dropped 17% after lowering its full-year sales guidance as it reported an unexpected decline in third-quarter revenues on the back of a significant decline in demand from China. Philips is now guiding to sales growth of just 0.5-1.5% for the year, down from earlier guidance of 3-5%.

Others in the health sector such as Demant, Siemens Healthineers and Elekta were also under the weather.

UK banking group Lloyds fell after saying it is assessing a set a new standard for motor dealers acting as credit brokers, requiring them to disclose commissions paid by lenders more comprehensively to customers. According to the Court of Appeal, lenders were also liable for any non-disclosures by dealers.

German automotive giant Volkswagen saw shares fall on the news that it will close the doors on at least three factories as it looks to potentially lay off tens of thousands of employees. Volkswagen did not specify which plants would be affected or exactly how many staff could be laid off, but told employees that the firm was "absolutely serious".

Oil majors BP, Shell, Repsol and TotalEnergies were firmly lower as the price of oil tanked, while travel stocks such as Deutsche Lufthansa, Wizz Air, Carnival, Air France-KLM and IAG surged on an improved fuel cost outlook.