Global equities extended their rebound on Friday, with European markets gaining in early trading and Asian stocks posting their best weekly performance in over three years. Investors are closely monitoring U.S.-Iran talks to assess whether the current fragile ceasefire can hold. Meanwhile, international crude oil prices are on track for their largest weekly decline in nearly nine months.
At the time of writing, Dow Jones futures were down 0.1%, S&P 500 futures rose 0.04%, and Nasdaq futures advanced 0.1%.
In Europe, the Stoxx 600 index climbed 0.6%, poised for a third consecutive weekly gain. Healthcare and technology sectors led the gains, rising 1% and 0.8% respectively. This followed optimistic comments from Ukraine's chief negotiator regarding the prospects for peace talks.
After seven consecutive sessions of gains, U.S. stock movements showed volatility, with index futures largely flat. The S&P 500 cash index is set to record its largest weekly advance in nearly a year.
In Asian markets, the MSCI Asia Pacific ex-Japan broad index rose 0.9%, bringing its weekly gain to 7.3%—the largest since November 2022.
**Market Tensions Ease** Analysts at Deutsche Bank noted that financial stress continues to ease ahead of weekend negotiations, at least from a market performance perspective. As expectations grow for a de-escalation in Lebanon, concerns about a broader ceasefire collapsing before weekend talks have also diminished.
Another signal of easing market tension is the VIX index, a measure of U.S. stock option volatility, which has retreated to pre-conflict levels—though it remains one of the few major market indicators to have recovered to that point.
Rupal Agarwal, Asian quantitative strategist at Bernstein in Singapore, suggested the current situation may indicate the war is "nearing its end," providing an opportunity for investors to refocus on pre-conflict trends and fundamentals.
**Strait of Hormuz Remains Closed** Despite improved risk appetite in equity markets, oil markets remain highly alert. Brent crude rose 1.8% to $97.67 per barrel but is still down about 10% for the week, having touched a one-month low earlier.
The Strait of Hormuz remains largely closed. Data show Thursday's maritime traffic was still well below 10% of normal levels, with Iran continuing to assert control over the strategic waterway. The closure during the six-week conflict previously caused significant global market disruptions, driving oil prices higher and exacerbating global energy supply tightness.
Skylar Montgomery Koning, a Bloomberg strategist, stated that markets appear to have reached a cautiously optimistic equilibrium ahead of weekend talks, with Brent holding below $100 per barrel supporting that sentiment. She noted that while Fridays during the conflict often saw selling pressure, markets now show stronger expectations for a potential "exit path."
**Weekend Peace Talks in Focus** Traders are focused on whether the two-week ceasefire agreement reached on Tuesday—which initially spurred a global equity rally and lower oil prices—can evolve into a more lasting peace arrangement. The U.S. President expressed optimism about a deal but also issued threats regarding Iran's imposition of tolls in the Strait of Hormuz. Traffic through the critical passage has shown little significant recovery since the ceasefire began.
Hao Hong, Chief Investment Officer at Lotus Asset Management, said, "Markets are beginning to price in the possibility of some agreement over the weekend. My quantitative models suggest this technical rally could last at least a few more days. Attention is shifting from the war itself to longer-term implications."
In Middle East developments, although clashes occurred in the region on Wednesday, both U.S. and Iranian forces appear to have paused most offensive actions. Meanwhile, Israel's Prime Minister has agreed to engage in dialogue with Lebanon.
However, geopolitical risks have not fully subsided. Kuwait's foreign ministry stated Thursday evening that Iran and its proxies launched another drone attack targeting multiple key facilities in the country.
Rajeev De Mello, Global Macro Portfolio Manager at Gama Asset Management SA, commented, "I wouldn't reduce positions before the weekend. The situation appears to be moving toward negotiation rather than continued conflict."
**Dollar Heading for Largest Weekly Drop Since January** In currency markets, the U.S. dollar index, which tracks the greenback against six major currencies, edged up 0.2% to 98.93 but is still set for its largest weekly decline since January. It is expected to fall 1.3% this week, marking its worst weekly performance since January.
The euro fell 0.2% to $1.167 but remained above its 200-day moving average. The pair broke above this key technical level earlier in the week for the first time in over a month, seen as a signal for further strength.
In bond markets, German bond yields, the benchmark for the eurozone, are set to rise for the week despite recording their largest single-day drop in years on Wednesday. The U.S. 10-year Treasury yield increased 0.4 basis points to 4.295%.
**U.S. CPI Data Awaited** U.S. Treasuries are poised to end a four-session rally as investors await the release of March inflation data later on Friday to assess the impact of oil price increases resulting from the Iran conflict on U.S. prices.
A Bloomberg survey indicates economists expect the U.S. Consumer Price Index (CPI) to rise 0.9% month-over-month, the largest monthly increase since 2022.
Kyle Rodda, Senior Financial Market Analyst at Capital.com, noted in a report that war-related headline risks remain the primary driver of market volatility, but inflation data also presents significant event risk.
Data released on Thursday showed U.S. initial jobless claims rose by 16,000 to 219,000 last week, while continuing claims fell by 38,000 to 1.8 million—the lowest level since May 2024.
**Oil Prices Still Face Upside Risks: JPMorgan Joins Bullish Camp** Several investment banks note that as Middle East tensions show signs of cooling, the pricing dynamics of international crude are shifting—market focus is moving from the conflict itself to the progress and pace of Strait of Hormuz traffic restoration. Although the ceasefire provides a window for supply recovery, uncertainty around shipping lane reopening remains. If the recovery falls short of expectations, upside risks for oil prices are increasing.
Against this backdrop, international crude has retreated from near $120 per barrel but continues to hover around $100.
JPMorgan stated that current market pricing reflects expectations for a relatively swift restoration of Strait of Hormuz traffic in the coming months, including a return to about half of normal flow by May and full restoration by June. However, the bank warned that a slower recovery—only reaching pre-conflict levels by July—could add $15 to $20 per barrel in upside risk, pushing futures prices back toward mid-March highs near $120.
**Retail Investors Accelerate Exit During U.S. Stock Rally, ETF Outflows Hit Yearly High** Stock market volatility triggered by energy price surges resulting from the Iran conflict is eroding confidence among some of the market's most reliable bulls: retail investors.
For instance, on Wednesday, the S&P 500 surged to its highest level since March following ceasefire news that prompted a strong rebound and forced hedge funds to cover short positions. While institutional investors rushed to buy back shorts, individual traders showed notable reluctance to chase the rally.
Instead, they used the upswing as an opportunity to sell into strength.
According to JPMorgan data, retail investors net sold ETFs at one point on Wednesday at the fastest intraday pace in a year, marking a significant departure from their typical behavior. By the close, retail ETF holdings had fallen to a 10-month low, and they continued to withdraw funds from individual stocks.
JPMorgan's Jain highlighted that this activity reinforces a broader shift that has been building in recent weeks. Ordinary investors have transitioned from active "buying the dip"—a defining feature during last year's market turmoil—to ignoring pullbacks, selling into rallies, and adopting more defensive positions.
**Focus Stocks** CoreWeave rose over 6% in premarket trading after Anthropic agreed to lease its AI computing power to support Claude.
Lumentum, a leader in optical communications, gained 4.8% premarket, with orders potentially booked through 2028.
Southwest Airlines fell nearly 9% premarket after eliminating its "free baggage" policy and raising baggage fees by $10.
Taiwan Semiconductor Manufacturing Company rose 2% premarket following better-than-expected Q1 revenue and a record monthly sales figure.
U.S.-listed Chinese new energy vehicle stocks generally advanced premarket, as China's March auto exports exceeded expectations. Li Auto gained over 3%, while Nio rose more than 2%.
Pony.ai increased over 1% premarket after releasing its PonyWorld world model 2.0.
Fangdd Network Group rose 2.56% premarket, as institutions suggested housing markets in Shanghai and Shenzhen may see a turnaround by year-end.
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