World shares rally, oil prices fall on war de-escalation hopes

NEW YORK/LONDON - Global stocks rallied and oil futures retreated on Wednesday on hopes of a de-escalation in the Iran war.

The U.S. dollar softened against a basket of other currencies, while U.S. Treasury yields rose from their lows after a pair of reports underscored resilience in the U.S. economy.

President Donald Trumpsaid the U.S. could end its military attacks on Iran in two to three weeks, and could return for "spot hits," if needed. He also threatened to quit NATO.

The war is in its fifth week and the White House is under pressure to de-escalate amid rising gasoline ?prices.

MSCI's gauge of stocks across the globe rose 1.75%.

"We have Trump's comments, which tend to change a bit," said Thomas Martin, senior portfolio manager at Globalt Investments. "Everybody's trying to guess as to what he really means by what he's saying. The markets want it to be positive, they want the war to be over."

On Wall Street, the Dow Jones Industrial Average .DJI rose 0.48% to 46,565.74, the S&P 500 .SPX gained 0.72% to 6,575.32 and the Nasdaq Composite .IXIC climbed 1.16% to 21,840.95.

In Europe, the STOXX 600 .STOXX jumped 2.5% on strength from travel, aerospace and defense stocks. That followed a March performance that saw the pan-European index logging its steepest monthly decline since June 2022.

Europe's broad FTSEurofirst 300 index .FTEU3 rose 57.45 points, or 2.47%. Earlier, Japan's Nikkei rallied 5.24%.

"Markets are trading this narrative that the war could be over, or at least that the U.S. could withdraw. That is creating this positive sentiment in risk assets," said Evelyne Gomez-Liechti, multi-asset strategist at Mizuho, though she added she was more inclined to be skeptical about the rally.

Iran war developments

Trump said on Wednesday that Iran had asked for a ceasefire, but he will consider it only after Tehran stops blocking the Strait of Hormuz. Iran denied it made any such request.

Analysts expect energy flows through the Strait of Hormuz would be slow to return to levels before the conflict even if a ceasefire is announced.

Trump is expected to provide an update on Iran in an address to the nation at 9 p.m. ET on Wednesday (0100 GMT Thursday).

Brent LCOc1 fell 2.7% to settle at $101.16 per barrel and U.S. crude CLc1 finished down 1.24% to $100.12. O/R

Euro zone bond yields dropped on hopes of de-escalation in the Middle East. Germany's 10-year yield DE10YT=RR, the benchmark for the euro zone, fell 1 basis point to 2.986%.The U.S. dollar index =USD slipped 0.12%, extending losses from the prior session's biggest one-day drop in two weeks.

The yield on benchmark U.S. 10-year notes US10YT=RR rose 1.6 basis points to 4.327%. The 2-year note US2YT=RR yield, which typically moves in step with Federal Reserve interest rate expectations, rose 0.8 basis points to 3.807%.

A PMI survey showed euro zone manufacturing growth bounced to its strongest in nearly four years in March as supply chain disruptions inflated growth figures.

International Energy Agency head Fatih Birol said on Wednesday that oil supply disruptions from the Middle East will rise in April and begin to impact Europe's economy as the closure of the Strait of Hormuz severely curbs supplies.

The euro EUR= rose 0.28% to $1.1584.

In commodities, gold rose for a fourth session as the dollar slipped, making the metal less expensive to holders of other currencies.

Spot gold XAU= rose 2.11% to $4,768.04 an ounce. U.S. gold futures GCcv1 settled 2.9% higher at $4,813.10. — Reuters