Barclays: US-Iran Deal Progress Could Broaden Global Equity Performance

Investing.com -- Global equities continue to reach new highs, supported by headlines indicating progress toward a US-Iran deal, according to Barclays. The bank notes that strong earnings momentum and stabilizing interest rates provide key support for equities, though current strength remains concentrated in US markets, artificial intelligence, and semiconductor sectors.

European markets have rebounded recently on hopes for peace but remain below their February 27 highs, Barclays said. The STOXX Europe 600 and EURO STOXX 50 indices are still trading beneath those levels, while the S&P 500 has climbed 9% above its late February peak.

Barclays believes confirmation of a deal aimed at reopening the Strait of Hormuz, along with subsequent declines in oil prices and interest rates, could broaden market performance and help European equities break out from their three-month trading range.

The bank points to wide dispersion between sectors that have benefited from the conflict, including energy, telecoms, utilities, and insurance, and those that have underperformed, such as consumer discretionary, mining, and banking stocks. Some reversal in this pattern is expected if a deal materializes.

Barclays acknowledges that an incomplete or temporary agreement could result in limited stock market gains. The bank's macro analysts expect oil prices to remain elevated, potentially sustaining inflation risks and limiting the durability of any rally in lagging sectors.

The bank notes that energy shocks in recent decades have not had lasting impacts on oil prices, which typically fell sharply once situations stabilized and excess supply increased. Current equity market positioning does not appear to assign high probability to such an outcome, though Barclays suggests it would be welcomed by President Trump ahead of midterm elections.

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