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World stocks edged higher on Friday while oil prices slid and headed for a weekly drop as traders awaited clarity on efforts to reopen the Strait of Hormuz and extend a US-Iran ceasefire. Sources told Reuters the United States and Iran had agreed to extend their ceasefire and lift shipping restrictions, though US President Donald Trump has yet to approve the deal and Iranian state media said it had not been finalised.
Oil futures fell around 2% and were on track for their steepest weekly decline since early April. MSCI’s world stocks index rose 0.4% to a record high. Gains were led by chipmakers, after upgraded forecasts from Dell boosted AI sentiment and lifted benchmarks in Tokyo and Seoul 2.5% and 3.5%, respectively.
“You’re getting these multiple confirmation points, and that’s just going to extend the rally for anything AI-related,” said Jason da Silva, director of global investment strategy at Arbuthnot Latham.
Gains elsewhere were more modest. Wall Street futures were broadly flat , while European stocks rose 0.5%. The S&P 500 closed at a record 7,563.63 on Thursday.
The dollar was on track for a small weekly decline, reflecting lower US Treasury yields. Analysts, however, said the drop in yields may be limited, as a U.S.-Iran deal is unlikely to quickly reverse inflation pressures from elevated fuel prices.
“The market’s already taking the view that a deal’s going to be done and the Strait is going to be open,” said Jason Wong, senior market strategist at BNZ in Wellington.
“The main point is it removes a tail risk of a really, really bad outcome. I don’t think it’s a green light to take oil down $20, or Treasuries down 20 points.” Investors are also tracking other geopolitical risks. NATO member Romania said on Friday a drone injured two people during an overnight Russian attack on neighbouring Ukraine – the first time in the war that a drone had hit a densely populated area in Romania and caused injuries.
Global bond yields are lower on the week, with the US 10-year Treasury yield at 4.4453%. Inflation in the euro zone’s four largest economies hovered above the European Central Bank’s 2% target for a third straight month in May, preliminary data showed on Friday, as a rise in fuel costs triggered by the Iran war began to feed through to other prices. Overnight US data on consumption, income, home sales and GDP came in on the soft side of expectations, with inflation running hot but a little bit under forecasts. In Japan, annual core inflation in Tokyo stayed below the central bank’s 2% target for a fourth straight month in May, though a rebound in factory activity pointed to resilience and supported the case for a June rate hike.
The yen remained under pressure after sliding back towards levels that previously prompted suspected intervention. At 159.275 per dollar, it was still just shy of the 160 level seen as a line in the sand for policymakers. Japanese authorities spent 11.7 trillion yen ($73.5 billion) on currency intervention between April 28 and May 27, the Ministry of Finance said on Friday, a fraction of its $1 trillion war chest.
The euro dipped 0.1% to $1.164175.
The New Zealand dollar has been a major mover this week, rising about 2% against the U.S currency after the Reserve Bank of New Zealand held rates steady on Wednesday but delivered a more-hawkish-than-expected outlook.
The UK’s domestically focused FTSE 250 index headed for a second straight weekly gain on Friday, powered by a surge in technology firm Ocado’sshares after its tie-up with Asda, and on reports that the US and Iran were near a ceasefire extension.
The blue-chip FTSE 100 index rose 0.3% to 10,459.94 points by 1118 GMT, looking to end the week largely flat. The midcap FTSE 250 added 0.8%.
Ocado soared 11.3% after supermarket group Asda struck a deal with the technology firm to overhaul its online business across the UK.
Oil prices slipped nearly 2% after reports that the US and Iran had reached agreement to extend a ceasefire and lift restrictions on shipping through the Strait of Hormuz, sources told Reuters. Shares of oil majors Shell and BP were mixed.
Hopes of a U.S.-Iran de-escalation and easing bets on UK interest rate hikes have buoyed domestic stocks over the past two weeks.
Bank of England Governor Andrew Bailey said that allowing inflation to run above the central bank’s 2% target is justified given the economic uncertainty and reiterated comments he made last week in which he said that the BoE had tightened monetary policy by taking rate cuts off the table.
Money market bets show traders are pricing in at least one 25 bps interest rate hike this year and see a near 30% chance of another move, down from 50% probability earlier this week.
Looking ahead, market participants remain cautiously optimistic that a sustained US-Iran agreement could stabilise energy markets and support global growth. However, analysts warn that persistent inflationary pressures from earlier fuel spikes, combined with mixed economic data from the US and Europe, may keep central banks on high alert. Any delay in finalising the Hormuz reopening could trigger renewed volatility in oil and shipping stocks. Meanwhile, investors will closely monitor next week’s central bank decisions and upcoming US jobs data for fresh signals on the pace of monetary easing, as geopolitical tail risks gradually fade into the background.
Agencies
