LONDON/SINGAPORE, April 10 (Reuters): Stocks advanced on Friday, with European markets gaining ground in early trading and Asian peers notching their best week in more than three years, as Israel sought talks with Lebanon, raising hopes for a break in Middle East hostilities and an opening of the Strait of Hormuz.
Iran has cited Israel's ongoing attacks on Lebanon as a key sticking point in its ceasefire agreement with the US, which requires Iran to reopen the strait, through which a fifth of global energy supplies typically pass. Delegations from Tehran and Washington are set to hold talks in Pakistan on Saturday.
The pan-European index .STOXX, opens new tab rose 0.3 per cent, on track for its third consecutive weekly gain. Healthcare .SXDP, opens new tab and technology .SX8P, opens new tab stocks led the way, rising 1 per cent and 0.8 per cent respectively.
"For markets at least, the financial stress has continued to ease before the weekend talks," Deutsche Bank analysts wrote. "So those hopes for a de-escalation in Lebanon helped ease concerns that the broader ceasefire could fall apart ahead of this weekend's talks."
Underscoring growing relief, a key index of equity options volatility has fallen back to pre-war levels, albeit the only major indicator to do so.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.9 per cent to put it up 7.3 per cent for the week, its biggest advance since November 2022.
Wall Street futures were mostly flat after reversing earlier losses. On Thursday, the S&P 500 rose 0.6 per cent, its seventh straight day of gains.
"We believe this could be the beginning of the end" of the war, and that presents "an opportunity for investors to focus on pre-war trends and fundamentals," said Rupal Agarwal, Asia quant strategist at Bernstein in Singapore.
Still, oil markets remained jittery, creeping up from this week's one-month lows. Brent crude rose 1.8 per cent to $97.67 a barrel, though still on course for a loss of around 10 per cent this week.
The Strait of Hormuz remains largely closed to shipping, with marine traffic at well below 10 per cent of normal volumes on Thursday as Tehran asserted its control of the strategic waterway.
The closure of the strait during the six-week Iran war sent shockwaves through global markets as oil prices surged and energy supplies tightened worldwide.
In a post on Truth Social, US President Donald Trump said Iran was doing a "very poor job" of allowing oil to pass through the strait. "That is not the agreement we have!"
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