European Stocks Rise as Mideast Tensions Ease Ahead of U.S.-Iran Talks
European stocks climbed Friday, with the pan-European STOXX index rising 0.3% for its third consecutive weekly gain. Healthcare and technology sectors led the advance, up 1% and 0.8% respectively.
The gains came as Israel sought talks with Lebanon, raising hopes for a break in Middle East hostilities and potential reopening of the Strait of Hormuz. Iran has cited Israel's ongoing attacks on Lebanon as a key sticking point in its ceasefire agreement with the U.S., which requires Iran to reopen the strategic waterway through which a fifth of global energy supplies typically pass.
Delegations from Tehran and Washington are scheduled to hold talks in Pakistan on Saturday. "For markets at least, the financial stress has continued to ease before the weekend talks," Deutsche Bank analysts noted.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.9%, putting it up 7.3% for the week - its biggest advance since November 2022. Wall Street futures were mostly flat after reversing earlier losses, while the S&P 500 rose 0.6% Thursday for its seventh straight day of gains.
"We believe this could be the beginning of the end" of the war, said Rupal Agarwal, Asia quant strategist at Bernstein in Singapore, suggesting an opportunity for investors to focus on pre-war trends and fundamentals.
Oil markets remained volatile, with Brent crude rising 1.8% to $97.67 a barrel, though still on course for a weekly loss of around 10%. The Strait of Hormuz remains largely closed to shipping, with marine traffic at well below 10% of normal volumes as Tehran maintains control of the strategic waterway.
In a post on Truth Social, U.S. President Donald Trump said Iran was doing a "very poor job" of allowing oil to pass through the strait, adding: "That is not the agreement we have!"
The U.S. dollar index was on track to lose 1.3% this week, its worst weekly performance since January. The euro fell 0.2% to $1.167 but remained above its 200-day moving average, signaling potential for further gains.
Investors awaited U.S. inflation data for insights into how the Middle East conflict has affected the world's biggest economy. Earlier data showed weekly U.S. jobless claims increased by 16,000 to 219,000, while continuing claims fell by 38,000 to 1.8 million, the lowest level since May 2024.
In an early sign that the Middle East conflict is feeding cost pressures into the world's second-largest economy, China's factory-gate prices rose for the first time in 3-1/2 years in March, according to official data.
In bond markets, German Bund yields were on track for a weekly rise despite their sharpest drop in years on Wednesday. The yield on the U.S. 10-year Treasury bond was up 0.4 basis point at 4.295%.
