European stocks edged higher on Thursday, finding some stability as tentative progress in U.S.-Iran peace negotiations helped pull oil prices lower and eased immediate inflationary fears, even as investors braced for what is expected to be the European Central Bank’s first interest rate hike in nearly three years.
The pan-European STOXX 600 index and the euro both posted modest gains, helping markets recover from overnight weakness in global shares. MSCI’s world share index had touched a one-month low after Oracle’s shares plunged nearly 9% on Wednesday, a selloff that rippled through Asian markets as well.
The renewed focus on diplomacy in the Middle East provided a counterweight, shifting attention toward the ECB’s policy decision later in the session.
Register for Tekedia Mini-MBA edition 20 (June 8 – Sept 5, 2026).
Register for Tekedia AI in Business Masterclass.
Join Tekedia Capital Syndicate and co-invest in great global startups.
Register for Tekedia AI Lab.
Brent crude futures reversed course to trade around $92 per barrel, reflecting optimism that a preliminary peace deal could be within reach. Three Iranian sources and a European official told Reuters that messages were being exchanged over a proposed memorandum of understanding, following a fresh round of tit-for-tat attacks that began with the downing of a U.S. Apache helicopter near the Strait of Hormuz earlier this week.
The ECB has now hiked rate, following weeks of increasingly clear signals from policymakers. Inflation in the euro zone has climbed above 3%, well above the bank’s 2% target, even as economic growth shows signs of faltering. The decision comes against a backdrop of persistent energy price volatility tied to the Iran conflict.
“For markets, the key question is how this move is framed: ‘one and done’ or the beginning of a tightening cycle?” Julien Lafargue, chief market strategist at Barclays Private Bank, said.
He expects ECB President Christine Lagarde to preserve flexibility, avoiding firm commitments on future moves, given the unpredictable geopolitical environment.
“Lagarde was likely to try and avoid committing to any follow-up moves to preserve maximum policy optionality given the ongoing Iran war,” he added.
The euro traded flat, just above $1.15, while the U.S. dollar index held steady above 100, remaining within a tight recent range after recent strength. In bond markets, Germany’s 2-year yields, most sensitive to ECB moves, rose 1.5 basis points to 2.72%, while the U.S. 10-year Treasury yield was up slightly at 4.5483%.
Crypto and Gold Find Modest Support
In cryptocurrency markets, Bitcoin recovered modestly, climbing 0.4% to $62,013.58, while ether rose 0.3% to $1,634.13. The assets showed some resilience after recent selling pressure linked to the upcoming SpaceX IPO, which has drawn speculative capital away from riskier assets.
Gold ticked up 0.3% to $4,083 per ounce, pausing a four-day decline that had pushed it to a more than six-month low. The metal continues to navigate a difficult environment: higher interest rate expectations weigh on non-yielding assets, but geopolitical risks and lingering inflation concerns provide underlying support.
The session reflects a market in transition — relieved by signs of diplomatic progress in the Middle East, yet cautious about the ECB’s next steps and the potential for renewed energy volatility. A successful de-escalation could ease pressure on inflation and allow central banks more room to maneuver, but any breakdown in talks risks reigniting the oil-driven shock that has complicated the global economic picture since late February.
For European equities, the modest gains suggest investors are balancing optimism around potential peace dividends with the reality of tighter monetary policy ahead. Lagarde’s ability to communicate a measured, data-dependent approach is said to be crucial in avoiding market overreactions.
In the background, the strength of the U.S. dollar and elevated Treasury yields continue to exert influence across global assets.
Markets remain highly attuned to both headline risks and the secondary effects on energy prices, inflation, and central bank policy as the Iran conflict enters a potentially decisive phase. But for now, the combination of diplomatic signals and policy expectations is keeping European markets in a cautious but constructive holding pattern.