The accord reached over the weekend in Geneva sent crude futures lower in Monday trading, weighing on the share prices in energy groups but boosting airlines facing huge fuel costs.
Support on equity markets came from another record-high finish on Wall Street ahead of the weekend, traders said.
London’s FTSE 100 index climbed 0.37 percent to stand at 6,698.96 points in late morning deals.
Frankfurt’s DAX 30 rallied 1.04 percent to 9,315.04 points and in Paris the CAC 40 added 0.61 percent to 4,304.79 compared with Friday’s close.
“News that the US has struck a deal with Iran on its nuclear activities has seen… oil prices decline, and has to a degree lessened the risk premium normally associated with Middle-East tensions,” said Brenda Kelly, senior market strategist at IG traders.
“The fall-out has seen stocks for the major oil companies such as BP and Royal Dutch Shell take a tumble… (but) airlines have been clear beneficiaries of the pull-back in the oil price,” she added.
IAG, parent of British Airways and Iberia, rallied 3.24 percent to 374.55 pence and Easyjet climbed 2.33 percent to 1,437.77 pence. German carrier Lufthansa advanced 1.52 percent to 16.02 euros.
BP fell 0.46 percent to 491.2 pence and Royal Dutch Shell ‘A’ shares lost 0.38 percent to 2,097 pence.
Shares in struggling French automaker PSA Peugeot Citroen jumped 3.76 percent to 10.61 euros on Iran and rumours that the group would hire a top executive from Renault, dealers said.
Peugeot cars are a ubiquitous presence on roads in Tehran and the prospective easing of economic sanctions could mean a boost for a company that is at pains to expand sales.
The Iran deal, a preliminary accord laying the foundation for a comprehensive agreement, was reached after marathon talks in Geneva between Iran and the so-called P5+1 nations comprising the United States, China, France, Britain, Russia and Germany.
Yen hits four-year low against euro
In foreign exchange activity, the European single currency fell to $1.3512 from $1.3555 late in New York on Friday.
But the euro reached 137.99 yen — the highest level since October 2009. The dollar hit a six-month high of 101.92 yen. The Japanese currency is considered by markets to be a safe bet.
On the London Bullion Market, the price of gold climbed to $1,231.03 an ounce from $1,225.55 on Friday.
“The interim nuclear agreement… has been welcomed initially by investors boosting investor risk sentiment further in the near-term,” said Lee Hardman, currency analyst at The Bank of Tokyo-Mitsubishi UFJ.
Under the deal, Tehran will limit uranium enrichment — the area that raises most suspicions over Iran’s nuclear programme — to low levels that can only be used for civilian energy purposes.
In return, it will get $7 billion (5.2 billion euros) in sanctions relief.
Western countries accuse Iran of seeking to build a nuclear weapon, a charge Tehran has long denied.
Asian stock markets mostly closed higher on Monday
As well as from Iran, traders took their cue from New York, where the S&P 500 ended above the psychologically important 1,800 level for the first time Friday. The Dow also closed at another record high, a day after it broke the key 16,000 level.
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