European shares stormed toward 2 1/2-year highs Monday as relief that the Iraq elections went better than expected helped to ease investor jitters, pressuring oil, gold and bonds and lifting the dollar.
The dollar also rose as yield-hungry investors prepared for Wednesday's expected quarter-point hike in U.S. interest rates, with closely-watched U.S. jobs data and the start of a Group of Seven meeting of economic powers both due Friday.
"This is a significant week for the dollar. The Fed's statement will maintain the 'measured' language but there is a real risk the Fed could raise rates faster, probably 50 basis points in March," said Adam Myers, foreign exchange strategist at Societe Generale.
"Safe-haven flows have been reversed as people are pleased something has not happened in the Iraq election."
The FTSEurofirst300 index of leading European shares jumped 0.7 percent to 1,062 points. Firmer U.S. stock index futures indicated Wall Street was also headed higher.
U.S. crude oil prices fell by around a dollar and were trading at around $46.25 a barrel as Iraq's election passed without disruption to the country's oil exports and OPEC producers agreed to keep output unchanged.
That gave heavy oil-consuming stocks a lift, such as British Airways and Lufthansa. Budget carrier Ryanair led the climbers after it raised its profit forecast for the full-year and posted a smaller-than-expected third-quarter profit.