U.S. Stocks Recover as Mideast Tensions Soften

EUR/USD traded higher on Thursday ending the session near 1.1655 as the Euro gained support against the US Dollar following reports of tentative progress in ceasefire negotiations between the United States and Iran.

According to CNN, Washington and Tehran have reached a preliminary agreement to reopen the Strait of Hormuz and begin nuclear discussions, although US President Donald Trump has yet to formally approve the deal. Iranian authorities have not publicly commented on the reported agreement.

US Vice President JD Vance noted that a few language-related issues remain unresolved, but added that negotiations are moving forward. Optimism surrounding a potential US-Iran breakthrough improved overall market sentiment, lending support to risk-sensitive assets such as the Euro.

On the economic front, the annual US Personal Consumption Expenditures (PCE) Price Index met market expectations, while the monthly figures came in softer than forecast. The weaker monthly inflation reading eased concerns about persistent price pressures and reinforced expectations that the US Federal Reserve may keep interest rates unchanged for an extended period.

Investors are now turning their attention to Germany’s preliminary inflation data, due later on Friday, for further direction on the Euro.

Gold prices struggled to extend Thursday’s rebound from a two-month low, trading in a narrow range during Friday’s Asian session as investors weighed conflicting signals surrounding the US-Iran peace negotiations and the outlook for US interest rates.

Gold had rebounded sharply on Thursday but momentum faded amid uncertainty over whether a lasting peace agreement between Washington and Tehran can be achieved.

The softer oil outlook and improving risk sentiment have weakened demand for the US Dollar as a safe-haven asset, offering some support to Gold prices. However, the proposed agreement still requires approval from US President Donald Trump, while significant disagreements remain over Iran’s nuclear program and the Strait of Hormuz. Concerns that hostilities could resume continue to limit market optimism and prevent deeper losses in the Dollar.

At the same time, stronger US inflation data reinforced expectations that the Federal Reserve may maintain higher interest rates for longer. The inflation figures offset weaker US growth data after the economy expanded at an annualized pace of 1.6% in the first quarter of 2026, revised down from an earlier estimate of 2.0%.

According to CME Group’s FedWatch Tool, markets currently see roughly a 50% probability of a 25-basis-point Federal Reserve rate increase in 2026. Expectations of prolonged higher borrowing costs continue to support the US Dollar and limit aggressive bullish momentum in non-yielding assets such as Gold.

Oil prices fell almost 1% early on Friday and remained on track for their steepest weekly decline since April, as markets reacted to reports that the United States and Iran had agreed to extend a ceasefire, easing fears of prolonged supply disruptions in the Middle East.

Sources told Reuters on Thursday that Washington and Tehran had reached a preliminary agreement to extend the ceasefire and ease restrictions on shipping through the Strait of Hormuz. However, the proposal still awaits approval from US President Donald Trump, while Iranian state media said the agreement has not yet been finalized.

Market sentiment has increasingly shifted toward expectations that the conflict is nearing an end, putting additional pressure on oil prices.

Oil markets have experienced sharp volatility in recent sessions, with both Brent and WTI swinging by as much as $6 amid conflicting reports over a potential resolution to the three-month US-Israeli conflict with Iran and the possible reopening of the Strait of Hormuz.

The strategic waterway, which handles roughly one-fifth of global oil and liquefied natural gas shipments, has seen traffic remain well below pre-war levels despite the improving outlook.

Reopening the strait would provide immediate relief to global energy markets, although a full recovery in supply flows may take time.

The S&P 500 and Nasdaq Composite ended Thursday at fresh record closing highs after reports indicated that the United States and Iran had reached a draft agreement to extend their ceasefire for 60 days, boosting investor sentiment despite lingering inflation concerns.

According to Reuters sources, the proposed agreement still requires approval from US President Donald Trump. Markets reacted positively to hopes that tensions in the Middle East may continue to ease, although investors remained sensitive to conflicting headlines surrounding the negotiations.

Economic data released Thursday showed that US inflation accelerated at its fastest pace in three years during April, driven largely by higher energy prices linked to the Iran conflict. At the same time, first-quarter US GDP growth was revised lower to an annualized 1.6%, signaling that economic momentum may be cooling. Despite the mixed macroeconomic backdrop, Wall Street maintained its upward momentum.

Microsoft rose 3.5% following a report from The Information that the company plans to unveil a new coding-focused AI model next week. Snowflake surged 36% after the cloud data company increased its annual product revenue forecast and announced a five-year, $6 billion AI infrastructure agreement with Amazon Web Services.

Investors continued to focus on the long-term growth potential of artificial intelligence, helping offset concerns about inflation and geopolitical instability.