European shares were mostly higher on Friday, and oil prices slipped as investor sentiment was fuelled by expectations of a deal between the US and Iran to extend the ceasefire in the war by 60 days.
On Thursday, negotiators from the US and Iran reached a tentative agreement to extend their ceasefire and hold a new round of talks on Iran’s nuclear programme, a US official said.
Iran has not publicly confirmed the deal, and the tentative agreement was still awaiting sign-off from US President Donald Trump.
Oil prices hit a one-month low on optimism over a de-escalation of the conflict, but remained above pre-war levels as the Strait of Hormuz largely stayed closed. Brent crude was trading at around $70 a barrel in late February before the war began.
Investors are also closely watching for a reopening of the Strait of Hormuz. The US official said the tentative accord makes clear that Iran would not be able to impose tolls on ships transiting the strait, while the US would gradually lift its sea blockade on Iranian ports.
“The oil market continues to edge lower amid growing optimism that the US and Iran are moving towards a deal,” ING commodities strategists Warren Patterson and Ewa Manthey wrote on Friday.
“A reopening of the strait would offer some immediate relief to the oil market, with tankers leaving the Persian Gulf. However, the recovery is still uncertain.”
On Friday, international benchmark Brent futures were down by more than 1% at $92.5 a barrel. At the same time, the West Texas Intermediate price for the nearest delivery was $87.40, down nearly 1.7%.
Analysts warned that any potential ceasefire extension should be viewed with caution, as it will take time for oil supplies to recover.
European stock markets benefit from the optimism
European stock markets edged up slightly on Friday morning, on a day marked by inflation data from the four largest eurozone economies. Those figures are expected to be among the key indicators considered by the European Central Bank ahead of its next meeting on 11 June.
Markets expect the ECB to raise interest rates, as inflation has been ticking up and drifting away from the central bank’s 2% target. This is mainly due to the Iran war and the energy price shock that stems from it.
The Euro Stoxx 50 opened with gains of 0.5%, while the leading stock indices in London and Frankfurt were up by nearly 0.2%. The CAC 40 in Paris gained 0.6%, and the Milan stock index was up by 0.4% at the open.
Leading gains in Europe were recorded by Siemens Energy, semiconductor giant Infineon Technologies and defence manufacturer Rheinmetall, with all three stocks advancing in early trading.
In other company news from Europe, pharmaceutical giant Novo Nordisk is drawing attention after France announced to become the first country in Europe to reimburse weight-loss drugs, including the company’s flagship products.
The Danish company’s shares traded up by 0.5% on Friday morning.
Elsewhere, markets were cheering the prospect of an end to the war. Leading indices in Japan and South Korea were trading near record highs.
Tokyo’s Nikkei 225 jumped 1.8% to 65,814.96 after data released on Friday showed Tokyo’s core inflation rate for May rose more slowly than economists had expected.
South Korea’s Kospi gained 2.3% to 8,369.81. Hong Kong’s Hang Seng added 0.4% to 25,098.68, while the Shanghai Composite Index fell 0.2% to 4,092.22.
Australia’s S&P/ASX 200 rose 1% to 8,681.80. Taiwan’s Taiex was up 2.3%.
On Thursday, Wall Street climbed to fresh records, with the benchmark S&P 500 setting another all-time high after rising 0.6% to 7,563.63.
The Dow Jones Industrial Average added less than 0.1% to 50,668.97, while the technology-heavy Nasdaq Composite gained 0.9% to 26,917.47.
Shares in discount retailer Dollar Tree surged 17.9% after it reported stronger-than-expected profits, while department store chain Kohl’s jumped 20.6%, also after reporting better-than-anticipated results.
In other trading early on Friday, the US dollar rose to 159.30 Japanese yen from 159.24 yen. The euro traded at $1.1646, down from $1.1651. Gold traded 0.5% higher at $4,553 an ounce.