Investor sentiment has improved on the prospect that the military conflict may be nearing an end. A Pakistani mediator is currently in Tehran, and the administration of U.S. President Donald Trump has expressed confidence in reaching an agreement that would allow for the reopening of the strategic Strait of Hormuz.
Trump himself stated that talks between Israel and Lebanon "will happen tomorrow," referring to Thursday.
This climate of de-escalation follows a meeting of the Israeli cabinet on Wednesday to address the situation in the neighboring country, after more than six weeks of an offensive against Hezbollah, which was launched in parallel with operations by Tel Aviv and Washington against Tehran.
In the commodities market, Brent crude fluctuated between gains and losses, trading down a slight 0.2% at 94.71 dollars, as traders monitored shifting reports regarding the Strait of Hormuz.
A source briefed by Tehran said Iran might consider allowing the free navigation of vessels through the Omani side of the waterway without the risk of attacks, as part of the proposals presented in its negotiations with the United States.
A potential end to regional instability would reduce fears of monetary tightening by central banks, which might otherwise be forced to raise interest rates if inflation spikes due to rising energy costs.
Elsewhere, investors were also digesting a heavy slate of economic data and corporate earnings on Thursday. The war is playing a significant role at the start of the earnings season, as markets scrutinize any corporate guidance regarding the conflict's impact on consumption and the global economy.
"Today we expect a positive tone thanks to growing expectations of a limited and transitory impact of the conflict on inflation and growth," Bankinter analysts noted in their morning report.
However, they warned that "the news flow is unpredictable -- the ceasefire until April 22 could be extended -- and the strength of earnings, especially in the U.S., where earnings per share (EPS) is growing at an estimated rate of 14.1% in the first quarter of 2026."
At 0702 GMT on Thursday, Spain's benchmark IBEX 35 was up 16.50 points, or 0.09%, at 18,202.30 points, while the FTSE Eurofirst 300 index of leading European shares advanced 0.26%.
In the banking sector, Santander rose 0.04%, BBVA added 0.10%, Caixabank shed 0.05%, Sabadell gained 0.45%, Bankinter appreciated by 0.24%, and Unicaja Banco lost 0.35%.
Among large-cap non-financial stocks, Telefonica fell 0.16%, Inditex advanced 0.30%, Iberdrola rose 0.10%, Cellnex was NOT AVAILABLE, and oil major Repsol lost 0.34%.
(Reporting by Tomas Cobos; editing by Benjamin Mejias Valencia)
