European markets were poised to open higher on Wednesday after the United States and Iran agreed to a conditional ceasefire, easing fears of an immediate escalation in the Middle East and sending oil prices sharply lower.
Futures indicators pointed to broad gains across the region, reflecting a global relief rally as investors reacted to signs of de-escalation between Washington and Tehran.
The positive tone followed a wider rebound in risk assets after US President Donald Trump said late Tuesday that he would suspend planned military strikes against Iran for two weeks.
Ceasefire lifts risk appetite
The rebound in European futures gathered pace as investors responded to the prospect of a temporary pause in hostilities.
The ceasefire, mediated with international involvement, is conditional on Iran reopening the Strait of Hormuz to commercial shipping, a key factor underpinning the shift in sentiment.
That helped drive a broader risk-on move across markets.
Asian equities climbed overnight, while US stock futures also surged, suggesting investors were moving back into risk assets after days of geopolitical anxiety.
The market reaction underscored how heavily sentiment had been weighed down by concerns that the conflict could spread and disrupt global trade and energy flows.
Even a conditional truce was enough to prompt a sharp reversal in positioning.
Oil drops as tensions ease
Oil prices fell below $100 a barrel as traders dialled back fears of an immediate supply shock.
The decline in crude offered some relief to equity markets, particularly in Europe, where lower energy costs could ease pressure on inflation and reduce risks to consumer demand and industrial margins.
Still, the outlook remained highly dependent on developments around the Strait of Hormuz, one of the world’s most important oil shipping routes.
Trump’s remarks suggested that any pause in military action remained tied to keeping the waterway open, meaning the market’s relief could prove fragile if there were fresh threats to maritime traffic.
Risks persist despite truce
Investors were not treating the ceasefire as a definitive end to hostilities.
Reports of missile and drone threats elsewhere in the region highlighted how quickly tensions could flare again, even if direct confrontation between the US and Iran appeared to be easing for now.
That leaves markets vulnerable to headline risk.
European equities may open with strong gains, but whether those advances hold through the session will depend on the absence of fresh military escalation and on whether oil continues to retreat.
Beyond geopolitics, investors will monitor corporate updates and economic data for further direction.
Those factors could help determine whether the opening rally broadens into a more durable move.
For now, the ceasefire has given markets a reason to reset, but the next test will be whether calmer headlines from the Gulf are enough to keep oil contained and risk appetite intact.
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