Key Takeaways
- Equity markets jumped on Wednesday as investors grew optimistic of a near-term resolution to the Iran war.
- The Morningstar Europe Index added 2.3% while Brent crude oil prices dipped to about USD 100.
- US President Donald Trump said Tuesday that the US could end the conflict “in two or three weeks.”
European stocks rebounded sharply and oil slipped Wednesday as global markets responded to the latest signal that the Iran war could soon come to an end.
The Morningstar Europe Index was up 2.3% at the open, as Germany’s DAX led gains across regional indexes, jumping 2.6%. Energy, travel and mining stocks were among the biggest gainers in a broad-based rally.
US futures ticked higher, too, with contracts tied to the S&P 500 and the tech-focused Nasdaq both up around 0.5%, extending a significant relief rally in the previous session. Meanwhile in Asia, the Morningstar Asia Index rallied 4.3% as South Korea’s KOSPI soared more than 8%.
“The sharp rally in stocks over the past 24 hours demonstrates how a resolution to the conflict, or hopes thereof, may quickly drive markets higher, and the imperative for long-term investors to stay invested and positioned for market upside,” UBS Chief Investment Officer Mark Haefele writes in a note. “We continue to believe global stock markets will end the year higher than they are today.”
US President Donald Trump said Tuesday that the US could end the conflict “in two or three weeks” and that the US could “leave” regardless of whether there was a peace agreement with Iran.
Iranian President Masoud Pezeshkian said separately that Tehran has the “necessary will” to end the war, while adding that it wants guarantees against further attacks.
The S&P added 2.9% and the Nasdaq jumped 3.8% following the comments Tuesday, to both record their best daily gains since last May, as investors welcomed signs of an end to a war that is in its second month.
Still, oil and gold prices remain elevated. Brent crude oil hovered around USD 100 a barrel, down about 2% but still up some 40% since the war began. West Texas Intermediate crude declined similarly to USD 99. Spot gold prices, meanwhile, were up around 1% to USD 4,714.
Morningstar chief European markets strategist Michael Field welcomed the signs of detente but urged investors to exercise caution in assessing the latest comments.
“We’ve had false dawns previously with the Ukraine war, only for investors to be left disappointed. Add to that the fact that oil is rising on the news, this would suggest that even if the direct conflict between the US and Iran ends, our troubles might not be over,” Field says.
Government bond yields ticked slightly lower Wednesday. Yields on 10-year German bunds were down 0.05 percentage points to 2.95% while those for UK gilts were 0.08 percentage points lower at 4.82%. The 10-year US Treasury yield was 0.03 percentage points lower at 4.27%.
