Paris – Global stock markets are benefiting on Wednesday from a wave of optimism following remarks by American President Donald Trump suggesting an end to the war in Iran within two to three weeks. European stock exchanges ended significantly higher, with the Paris Stock Exchange gaining 2.10%, Frankfurt 2.73%, London 1.85%, and Milan climbing 3.17%. In Switzerland, the SMI rose by 1.68%.
On Wall Street, around 4:00 PM GMT, the Dow Jones was up 0.94%, the Nasdaq rose by 1.62%, and the broad S&P 500 index gained 1.10%.
“Since American stocks have been more resilient, the potential for growth is stronger in Europe,” noted Christopher Dembik, an investment strategy advisor at Pictet AM, attributing the biggest rise in European stock markets to a speculative aspect.
Overall, the main stock market indices “experienced a clear increase on Wednesday, driven by the statements of American President Donald Trump suggesting that the conflict with Iran could be coming to an end,” summarized Patrick Munnelly from Tickmill Group.
Donald Trump stated on Wednesday that the Iranian President called for a ceasefire, but ruled out any truce without the opening of the Strait of Hormuz, a strategic passage for Middle Eastern oil whose blockage by Iran destabilizes the global economy.
The American President also mentioned a possible end to the war within “two or three weeks”, agreement or not. He is set to “provide significant new information on Iran” in an address scheduled for the end of the day 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 seemed open to direct negotiations with Tehran and mentioned the possibility of de-escalation even in the absence of a formal agreement,” noted Mr. Munnelly.
“There are still significant areas of uncertainty,” reminded Fawad Razaqzada, a market analyst for Forex.com. “The main concern is about the Strait of Hormuz, a passage for 20% of the world’s oil supply.”
The Revolutionary Guards, the ideological army of the Islamic Republic, stated that the Strait of Hormuz would remain closed to the country’s “enemies.”
On the ground, the perimeter wall of the former US embassy in Iran, a symbolic site of hostility between the two countries in central Tehran, was damaged on Wednesday morning. The day before, industrial complexes in the center and southwest of the country were affected.
“Calmer oil market”
Donald Trump’s remarks also calmed the oil market, “but Brent remaining around $100 per barrel shows that the market is not fully convinced yet,” tempered Fawad Razaqzada.
The global reference crude, Brent from the North Sea, remained down but crossed the $100 per barrel mark ($101.82, -2.07%). Its American counterpart, WTI, was trading at $99.60 (-1.76%) around 4:00 PM GMT.
Even if Trump’s comments were to give an immediate boost to stocks, “disruptions in the energy sector would continue for several months and are likely to weigh on both inflation and economic growth,” noted Emma Wall, head investment strategist for Hargreaves Lansdown.
“There are simply too many uncertainties, both regarding supply disruptions and geopolitical escalation, for prices to actually significantly readjust downwards for now,” summarized Mr. Razaqzada.
“Relief in the bond market”
The easing was also felt in the government debt market, weighed down by inflation risks that worry investors.
The interest rate on Germany’s ten-year bonds dipped 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 interest rates, which is quite common: the bond market often anticipates turning points,” analyzed Antoine Andreani, XTB’s director of analysis. “Stocks simply followed the movement. For now, it’s more about a technical rebound than a real turnaround.”
