Barring a major trend reversal, the CAC, DAX, and Euro STOXX are all on track to post positive weekly performances, with gains currently standing at approximately 1.7%, 2.7%, and 2.3% respectively.

Investors clearly continue to bet on the possibility of the United States and Iran agreeing to a near-term end to hostilities. Tehran stated yesterday that it is reviewing a new American proposal following a visit by a Pakistani mediator.

U.S. Secretary of State Marco Rubio expressed hope that this trip would advance diplomatic efforts.

Between diplomatic hopes and economic reality

The current environment, however, calls for caution. Following the rebound of recent days, European markets appear to have already priced in much of the optimism surrounding a potential deal between Washington and Tehran.

According to several strategists, markets seem more inclined to consolidate their gains rather than significantly extend the recovery, especially since the PMI indices published yesterday painted a bleak picture of the European economy, amid rising inflationary pressures and falling demand.

In fact, the recurring cycle of escalation and de-escalation in the conflict with Iran is likely to encourage investor restraint, which could sustain uncertainty and curb risk appetite.

'The conflict in the Middle East has decreased in intensity, but the ceasefire remains fragile,' notes Bruno Cavalier, Chief Economist at Oddo BHF.

'If there is no rapid start to a return to normalcy, it will lead to renewed tension in oil prices and a sharper slowdown in activity,' he warns.

'For now, the weakness is contained because the real economy always reacts with a lag, but we believe it will be difficult to avoid an economic chill for one or two quarters,' the analyst cautions.

U.S. index futures currently signal a Wall Street opening up by approximately 0.3% for the Dow Jones, 0.4% for the S&P 500, and 0.5% for the Nasdaq Composite.

On Thursday, the Dow Jones finished with a 0.5% gain, hitting a new closing record. It benefited from a 12.5% surge in IBM, which is set to receive a massive federal investment in quantum computing. This more than offset the lukewarm reception given to Nvidia's results (-1.8%), despite them being much better than expected.

A welcome, albeit modest, lull in yields and oil

In the government bond market, the U.S. ten-year yield is edging back toward 4.59%, as the minutes from the latest Fed meeting failed to soothe fears regarding inflation and interest rates. However, it remains below the nearly 18-month peak of approximately 4.6870% reached on Tuesday.

Serenity is also far from prevailing in Europe, where French OATs are failing to ease despite the very poor French PMI figures released the previous day, remaining stuck around 3.888%. Similarly, Bunds are holding near 3.10%.

Still trapped between support at 1.1550 and resistance at 1.1685, the euro is down 0.1% at 1.1612 against the dollar this morning.

Oil, whose surge has been a dominant market theme this week amid Middle East tensions, remains near its highest levels in almost three years. Brent is trading at 105.1 dollars per barrel but is showing a decline of about 4% for the week. West Texas Intermediate (WTI) is up 2% at 98.2 dollars, while posting a weekly drop of 5.8%.

Investors will now turn their attention to the final indicators of the week.

Whether it is the German Ifo business climate index, due this morning, or the University of Michigan consumer sentiment index, scheduled for this afternoon in the U.S., these statistics are expected to once again reflect the impact of recent inflationary pressures on economic sentiment.