European stocks edged higher Thursday as investors weighed the prospect of a negotiated end to the US-Iran war, with oil prices continuing a sharp weekly decline and haven assets rallying on hopes of a resolution to the conflict that has roiled global markets for months.
Markets React to Diplomatic Progress
The pan-European Stoxx 600 opened with a gain of 0.14% on Thursday, according to CNBC, as traders awaited Tehran’s response to a US peace proposal. The modest gains followed a stronger session Wednesday, when the Stoxx 600 surged 2.3% and the FTSE 100 jumped 2.2% on initial reports of a breakthrough.
Brent crude fell sharply this week from above $115 a barrel over the weekend to around $106 by Tuesday, as the pause in hostilities reduced the risk premium that had built up during the Strait of Hormuz standoff. The euro strengthened to $1.1762 against the dollar on Wednesday, according to European Central Bank data, its highest level in weeks. Gold also surged, with spot prices climbing above $4,700 an ounce — up more than 2% — as weakening dollar conditions and geopolitical uncertainty drove safe-haven demand.
A 14-Point Framework
The White House is reportedly working to finalize a one-page, 14-point memorandum of understanding with Iran that would serve as a framework for ending the conflict and establishing broader nuclear negotiations. According to CNBC, a representative from Iran’s foreign ministry said Tehran is “assessing” the proposal, while Washington expects feedback on “several critical points” within 48 hours, Axios reported.
Pakistan has served as a key mediator, with Tehran expected to respond to the US proposal through Pakistani channels on Thursday.
Trump’s Carrot and Stick
President Trump paused the military’s “Project Freedom” operation to escort ships through the Strait of Hormuz on Tuesday, citing “great progress” toward a deal. But he coupled the diplomatic opening with a stark warning. “If they don’t agree, the bombing starts, and it will be, sadly, at a much higher level and intensity than it was before,” Trump wrote on Truth Social on Wednesday.
In an interview with PBS News, Trump said the war has “a very good chance of ending,” adding that he hoped to resolve the matter before his trip to China next week. Japan’s Nikkei 225 soared more than 5% Thursday to reach 62,000 for the first time, while Hong Kong’s Hang Seng rose 1.47%.
