(new: lead updated with current Middle East situation, share price performance)

FRANKFURT/PARIS/LONDON (dpa-AFX) - European real estate stocks staged a sharp recovery on Monday as the broader market performed a sudden U-turn. Earlier in the session, the sector had been among the biggest laggards in the European industry overview. The reversal was triggered by U.S. President Donald Trump's order to refrain from strikes on Iranian power plants and energy infrastructure for the next five days. This was the result of "very good and productive talks regarding a full and final settlement of our hostilities" over the past two days, Trump wrote on his Truth Social platform.

The Stoxx Europe 600 Real Estate index, which had slumped by 3.6 percent at midday to hit its lowest level since the tariff shock triggered by President Trump last April, was trading 0.7 percent higher in late trading. Since the outbreak of the war between the U.S., Israel, and Iran in late February, the previously high-flying sector has retreated significantly.

Shares in Vonovia recovered noticeably from a 6 percent intraday drop, last trading just 0.1 percent lower. In the MDax, TAG Immobilien, Aroundtown, and LEG posted gains ranging between 0.8 and 2.1 percent. Patrizia climbed 1.2 percent in the SDax. Within the UK's FTSE 100, which includes several real estate heavyweights, stocks such as British Land, Segro, and Land Securities also swung from deep losses into clear gains.

The heavy losses seen during the morning session had been attributed to rising bond yields driven by higher oil prices. These markets also reversed course following the news.

"The longer crude oil prices remain at elevated levels, the more central banks are backed into a corner," market strategist Stephen Innes of SPI Asset Management had warned earlier in the day. He noted that the prospect of interest rate cuts was increasingly giving way to the threat of monetary tightening - not due to robust economic growth, but in the face of persistent inflation. This, he argued, leads to dangerous stagflation - a combination of economic weakness and rising prices. Such a development is toxic for real estate stocks, as it drives up financing costs./gl/ag/men/edh/jha/