Paris (AWP/AFP) – Global stock markets are benefiting from a wave of optimism on Wednesday after comments made by U.S. President Donald Trump suggesting the end of the war in Iran within two to three weeks.
European stock exchanges closed sharply higher, with the Paris Stock Exchange up 2.10%, Frankfurt up 2.73%, London up 1.85%, and Milan climbing 3.17%. In Switzerland, the SMI rose 1.68%.
On Wall Street, around 4:00 pm GMT, the Dow Jones was up 0.94%, the Nasdaq was up 1.62%, and the S&P 500 was up 1.10%.
“With American stocks proving to be more resilient, there is a stronger potential for growth in Europe,” noted Christopher Dembik, investment strategy advisor at Pictet AM, pointing out that the strongest increase in European stock markets can be attributed to speculative factors.
Overall, the main stock indices “experienced a significant increase on Wednesday, driven by statements from U.S. President Donald Trump suggesting that the conflict with Iran could be coming to an end,” summarized Patrick Munnelly of Tickmill Group.
Donald Trump stated on Wednesday that the Iranian president was calling for a ceasefire but ruled out a truce without the re-opening of the Strait of Hormuz, a strategic passage for Middle Eastern oil whose blockade by Iran destabilizes the global economy.
The U.S. president also mentioned a possible end to the war within “two or three weeks,” whether an agreement is reached or not. He is expected to provide “important new information on Iran” in a speech scheduled for late evening in the United States, at 01:00 GMT on Thursday according to the White House.
Donald Trump’s statements “hinted at a possible resolution to the conflict with Iran. Washington appeared open to direct negotiations with Tehran and mentioned the possibility of de-escalation even in the absence of a formal agreement,” observed Mr. Munnelly.
“There are still significant uncertainties,” noted Fawad Razaqzada, a market analyst for Forex.com. “The main concern is the Strait of Hormuz, a passage for 20% of global oil supply.”
The Revolutionary Guards, the ideological army of the Islamic Republic, stated that the Strait of Hormuz would remain closed to the “enemies” of the country.
On the ground, the perimeter wall of the former U.S. embassy in Iran, a symbolic site of hostility between the two countries in central Tehran, was damaged on Wednesday. The day before, steel complexes in the center and southwest of the country were also affected.
Calm in the Oil Market
Donald Trump’s comments also calmed the oil market, but with Brent hovering around $100 a barrel, it shows that the market is not fully convinced yet,” tempered Fawad Razaqzada.
The global benchmark crude, Brent from the North Sea, remained down but crossed the $100 per barrel mark ($101.82, -2.07%). Its American equivalent WTI was trading at $99.60 (-1.76%) around 4:00 pm GMT.
Even if Trump’s comments were to immediately boost stocks, disruptions in the energy sector would continue for several months, likely weighing on both inflation and economic growth,” noted Emma Wall, chief investment strategist for Hargreaves Lansdown.
“There are simply too many uncertainties, both regarding supply disruptions and geopolitical escalation, for prices to significantly readjust downward at the moment,” summarized Mr. Razaqzada.
Relief in the Bond Market
The relief was also felt in the bond market, burdened by inflation risks that concern investors.
The yield on Germany’s 10-year bonds fell below 3% for the first time in several days (2.99%). The French equivalent showed a yield of 3.68% on ten-year bonds, compared to 3.72% the day before.
“Relief first came from the bond yields, which is quite common: the bond market often anticipates turning points,” analyzed Antoine Andreani, director of XTB’s analysis. “Stocks simply followed the movement. For now, it is more of a technical rebound than a real turnaround.”
AFP/AL
