Oil prices tumbled and stocks surged on Wednesday after a report said the White House believed it was nearing a memorandum to end the war with Iran, while enthusiasm for AI-driven trades also gathered pace.
The news outlet Axios reported that the U.S. expected Iranian responses on several key points in the next 48 hours. A Pakistani source involved in the peace efforts confirmed the report to Reuters on Wednesday.
Brent crude, the global benchmark, plunged 10.6% to $98.20 per barrel, its lowest in two weeks.
The war has all but closed the Strait of Hormuz, through which 20% of global energy normally flows, but Axios reported the deal would involve both sides lifting restrictions around transit through the waterway.
Europe's STOXX 600 index extended its gains and was last up 2.6% after climbing 0.7% a day earlier. MSCI's All-Country World Index climbed 0.9% to a fresh record.
Futures for the U.S. S&P 500 rose 0.9%, a day after the index rallied 0.8% to hit its latest record high, driven by strong company earnings and excitement about artificial intelligence.
"A pretty punchy move on the back of those stories, almost as if the market has shifted into 'buy everything' mode," said Michael Brown, senior research strategist at Pepperstone.
"It's difficult to say how close to a deal we might be," he said. "Market participants, though, aren't going to wait for confirmation of good news and are essentially now front-running a positive outcome."
The U.S. dollar, which has been a safe haven during the Iran war, dropped 0.55% against its major peers, reflecting investor hopes for a possible deal.
Meanwhile, yields on government bonds fell along with oil prices as traders dialled down their bets on central bank rate hikes.
The 10-year U.S. Treasury yield fell 7 basis points to 4.35%.
Although stocks have rallied sharply, ructions in energy and bond markets could weigh on global growth. Oil prices are around 35% higher than they were when the conflict began in late February, while 10-year Treasury yields are around 40 bps higher.
Analysts also cautioned that a peace deal is far from certain.
"The probability of disappointment looms," said Ipek Özkardeskaya, senior analyst at Swissquote, "suggesting that a part of the gains could be retraced."
The broadest index of Asia-Pacific shares outside Japan jumped 3.2%.
Samsung Electronics surged 14%, topping a $1 trillion market value and overtaking Berkshire Hathaway.
"Due to the capex spend we are seeing from (AI) hyperscalers in the U.S., the earnings growth trajectory for sectors such as semiconductors, tech hardware, industrials and materials in Asia exceeds anything I have seen in a long time," said Rushil Khanna, head of equity investments for Asia at Ostrum, an affiliate of Natixis Investment Managers.
In the U.S., shares in chipmaker Advanced Micro Devices jumped 16% in extended trading as the company forecast second-quarter revenue above Wall Street expectations on Tuesday, helping drive AI enthusiasm across markets.
Elsewhere in foreign exchange markets, the yen strengthened sharply, gaining as much as 1.8% to 155 against the dollar as traders remained on the lookout for fresh intervention by authorities in Tokyo in support of the beleaguered currency.
