According to futures contracts, the Paris CAC 40 is poised to gain 0.3% at the open, while London's FTSE is seen up 0.1% and the Euro STOXX is expected to edge up by less than 0.1%.

European equity markets rose sharply on Wednesday amid optimism regarding a potential reopening of the Strait of Hormuz. This followed reports from Axios suggesting that Washington is close to finalizing a deal with Iran to end the conflict.

At the closing bell, Paris posted a 2.9% gain, significantly outperforming Frankfurt (+2.2%) and London (+2.2%).

Catch-up potential remains intact for European indices

While the prospect of a positive outcome to the conflict and a normalization of maritime transit had already been partially priced in by markets, the acceleration of the timeline appears to have caught traders by surprise yesterday.

'Although a deal and the opening of the Strait have long been reflected in prices, the anticipated timeframe for this opening has moved forward significantly,' noted analysts at Danske Bank.

Following half a dozen similar announcements from Washington, Axios indicates that this is the 'closest a deal has been since the start of the conflict.'

This shift is clearly visible in prediction markets. On the Polymarket platform, the probability of a reopening before the end of May is now estimated at 30%. More significantly, the probability of a breakthrough before the end of June has jumped to 75%, up from just 50% the previous day.

Despite these encouraging developments, a degree of caution remains in Europe, where major indices are still trailing their pre-war peaks by 2%, suggesting that the catch-up potential is not yet exhausted.

'If Iran approves the deal, equities could have further room to run,' Danske Bank suggested.

New peaks on Wall Street driven by AI

In New York, the three major benchmark indices finished with gains ranging from 1.2% to 2.1% last night, with the S&P 500 and Nasdaq hitting new record highs. They were supported by hopes for a diplomatic resolution to the U.S.-Iran conflict, as well as several robust earnings reports from AI-related stocks.

AMD surged 18% after beating expectations and raising its guidance, driven by 57% growth in its data center business thanks to AI accelerators and EPYC processors. In its wake, Arm Holdings gained 13% and Intel rose 4%.

Beyond the rally in the semiconductor sector, the digital infrastructure theme also supported Dell, which climbed 10% following the announcement of a partnership with TotalEnergies and Nvidia to design and install a new supercomputer.

The trend is equally positive in Asia, where the Tokyo Stock Exchange soared nearly 6% on Thursday after a three-day closure for 'Golden Week,' a period characterized by a high concentration of public holidays.

Falling oil prices ease bond market tensions

The renewed appetite for risk is also supported by a sharp decline in oil prices, which has alleviated fears of a prolonged energy shock.

After plunging more than 7% yesterday, Brent crude is attempting a modest technical rebound this morning, gaining 0.6% to 101.8 dollars. WTI, which has now slipped back below the 100-dollar mark, is recovering slightly by 0.4% to 95.5 dollars.

This environment favors a decline in government bond yields by removing the threat of potential interest rate hikes by central banks due to rising inflationary pressures amid soaring crude prices.

It is clear that investors have shifted back into a mode of euphoria and maximum optimism, with inflationary fears seemingly laid to rest. This has led to a significant easing of U.S. rates, with the 10-year Treasury yield falling 6.5 basis points to 4.35%.

This wave of optimism is also benefiting European bond markets, with yields on German Bunds dropping seven basis points, moving back toward 3%.

Economic indicators and corporate earnings under close watch

The main event on today's economic calendar saw German industrial orders jump 5% in March, despite concerns caused by the war in the Middle East and the subsequent tensions in energy prices.

Eurozone retail sales figures will follow at 11:00 AM, ahead of the early afternoon release of the latest productivity and weekly jobless claims data in the United States.

On the earnings front, the session promises to be intense with reports from Engie, Henkel, Legrand, and Shell in Europe, followed by McDonald's across the Atlantic at lunchtime.