Robust Bank Earnings and AI Optimism Drive Markets Higher

EUR/USD remained supported above the 1.1800 level in early Asian trading on Thursday, with the pair hovering near 1.1805 as improving market sentiment boosted demand for the Euro against the US Dollar.

Investor confidence strengthened following renewed optimism over a potential extension of the ceasefire between the United States and Iran. Hopes for fresh diplomatic talks and progress toward a longer-term peace agreement encouraged flows into risk-sensitive assets, including the common currency.

According to reports, both sides are moving closer to prolonging the truce and resuming negotiations, despite ongoing tensions surrounding the Strait of Hormuz.

Meanwhile, attention remains on the European Central Bank’s policy outlook. ECB officials are reportedly leaning toward leaving interest rates unchanged at the April meeting. ECB President Christine Lagarde recently said policymakers must remain “completely agile” on rates, while emphasizing there is no current bias toward tightening policy.

Even so, market participants continue to price in the likelihood of two quarter-point rate increases later this year, helping underpin the Euro.

Gold prices maintained a firm tone during Thursday’s Asian session, trading near $4,835 and staying close to the nearly four-week high reached in the previous session. The precious metal continued to find support as weakness in the US Dollar and shifting Federal Reserve expectations outweighed improving risk sentiment.

Market optimism has grown on hopes that diplomatic channels with Iran remain open, reducing immediate demand for the Dollar as a traditional safe-haven asset. Comments from US President Donald Trump suggesting the conflict with Iran could soon ease, alongside White House confidence in reaching a settlement, helped improve investor sentiment. Reports also point to a possible second round of peace talks between Washington and Tehran in the coming days.

The more constructive tone in global markets has pressured the Dollar, while lower expectations for additional Federal Reserve tightening have provided further support for non-yielding assets such as gold.

However, ongoing geopolitical tensions could limit further upside for the metal. The US naval blockade of Iranian ports remains in effect, while Iranian officials have warned they could disrupt trade flows in the Gulf if restrictions are not lifted. Tehran has also demanded an end to Israeli military actions in Lebanon as a condition for further talks. Meanwhile, Israeli Prime Minister Benjamin Netanyahu said operations would continue, keeping regional risks elevated.

With geopolitical uncertainty still unresolved, safe-haven demand may remain intact, even as a softer Dollar continues to support gold prices.

Oil prices were little changed on Thursday after recovering from earlier losses, as traders remained cautious over whether peace talks between the United States and Iran would lead to a lasting agreement capable of restoring disrupted energy supplies from the Middle East.

The ongoing US-Israeli conflict involving Iran has triggered one of the most severe disruptions to global oil and gas flows on record, largely due to restricted traffic through the Strait of Hormuz — a critical shipping route that normally handles around 20% of global oil and liquefied natural gas trade.

Analysts estimate that approximately 13 million barrels per day of oil supply has been disrupted by the closure of the waterway, even after accounting for rerouted pipeline shipments and limited tanker traffic still passing through the area.

According to a source familiar with Tehran’s position, Iran may consider allowing unrestricted shipping through the Omani side of the Strait of Hormuz if an agreement is reached to prevent renewed conflict after the current two-week ceasefire, which began on April 8.

US and Iranian officials are reportedly considering further negotiations in Pakistan as early as this weekend, with Pakistan’s army chief arriving in Tehran on Wednesday in an effort to mediate and prevent renewed hostilities.

Meanwhile, US Treasury Secretary Scott Bessent said Washington would not renew waivers that had allowed some purchases of Iranian and Russian oil without triggering sanctions. Adding to concerns over tightening supply, US government data released Wednesday showed inventories of crude oil, gasoline, and distillates all declined last week, as imports fell and exports increased to help offset disrupted global flows.

US equities advanced on Wednesday, with the US 500 and US Tech 100 closing at fresh record highs as easing concerns over US-Iran tensions and upbeat earnings expectations fueled investor appetite for risk assets. The rally reflected growing confidence that geopolitical risks may be starting to recede, allowing markets to refocus on fundamentals and corporate performance.

Investor sentiment improved after US President Donald Trump said the conflict involving Iran was “close to over,” while the White House expressed confidence that a diplomatic agreement could be reached. Reduced fears of a broader regional escalation helped support demand for growth-oriented and cyclical sectors.

Strong corporate earnings also helped drive gains. Major US banks kicked off reporting season with better-than-expected profit growth, reinforcing confidence in the broader economic outlook. Bank of America shares rose 1.8% after posting solid first-quarter results. Analysts broadly expect earnings growth across the US 500 this season, which could provide further support for valuations if results continue to beat expectations.

US Treasury prices fell, pushing yields higher as investors pared recent safe-haven positioning. The two-year Treasury yield rose 1 basis point to 3.761%, while the benchmark 10-year yield increased 2.5 basis points to 4.282%. Rising yields suggest investors are rotating away from defensive assets as risk appetite improves.