European stock markets recorded a significant rise, marking their largest single-day gain in nearly a month, as investor optimism grew over a potential agreement between the United States and Iran.

The Stoxx Europe 600 index closed up 2.2%. Washington has presented Tehran with a memorandum; if accepted, it would gradually reopen the Strait of Hormuz and lift the U.S. blockade on Iranian ports.

Travel stocks led the gains, with airline companies showing the strongest performance. Air France-KLM rose 9.6%, while Ryanair surged 10%. The energy sector performed the worst as Brent crude fell 6.8% to $102 per barrel.

"Markets continue to price in expectations of de-escalation and a loosening of supply constraints," said Geoff Yu, Senior Macro Strategist at BNY Mellon. "The path ahead will still be bumpy, but the direction seems clear."

The trading day also featured a flurry of earnings reports. Novo Nordisk rose 2.5% as sales in the first quarter were boosted by its new Wegovy tablet. Automobile stocks rallied strongly, with BMW's share price jumping 5.4%.

Regional equity markets remain below the record highs set earlier this year. The Stoxx 600's gains have been largely driven by a small number of companies; by the end of April, just six stocks accounted for nearly 90% of the index's increase.

"There is a growing desire in the market to find a new narrative to take over," said Joachim Klement, Head of Strategy at Panmure Liberum. "This increases the risk of a sudden rotation in market leadership and a breakdown in momentum."