U.S. stock futures climbed on Wednesday as the Trump administration intensified efforts to end the conflict with Iran, sparking initial hopes for a diplomatic resolution to Middle East tensions. This led to a partial recovery in equities, a rally in bonds, and a decline in oil prices, with Brent crude falling back below $100 per barrel.

The U.S. delivered a 15-point proposal to Iran aimed at concluding hostilities, boosting market expectations that a solution might be near and potentially easing pressure on the Strait of Hormuz. Additional reports indicated that Iran would permit the passage of "non-hostile" vessels through the strait, further weighing on oil prices. International mediators are pushing for talks between the parties to be held on Thursday.

The Europe Stoxx 600 index advanced 1.3%, positioning it for its first three-day winning streak since the conflict began.

U.S. stock futures moved higher. Futures for the Dow Jones Industrial Average and the S&P 500 both gained 1%, while the tech-heavy Nasdaq 100 futures rose 1.1% in pre-market trading.

In pre-market U.S. activity, mining stocks like Newmont Corp. and Freeport-McMoRan Inc. were among the leading gainers. ARM Holdings surged 13% on plans to generate approximately $15 billion in annual revenue from chip sales within the next five years.

Asian markets closed higher on Wednesday. South Korea's Kospi index finished up 1.6%, marking a second consecutive day of gains, driven by strength in defense stocks. China's Shanghai Composite index rose 1.3%, while Japan's Nikkei 225 climbed 2.9%. Among notable individual movers, SoftBank Group shares rallied on news that Arm is developing its own AI chips.

**Oil Prices Fall Below $100** Despite the Strait of Hormuz remaining effectively closed, Brent crude fell 4.7% to drop below $100 a barrel. The U.S. benchmark, WTI crude, declined 3.9% to $86.28 per barrel. Charu Chanana, Chief Investment Strategist at Saxo Bank, commented, "Markets often bottom out before a war actually ends. Once the probability of further escalation starts to decline, investors tend to act preemptively."

European natural gas prices fell sharply as hopes for de-escalation outweighed supply disruption concerns. The benchmark Dutch TTF front-month contract dropped 6.4% to €50.58 per megawatt-hour. However, analysts at ANZ noted, "QatarEnergy has declared force majeure on some supply contracts after its facilities were attacked last week." A key risk for Europe is intensified competition with Asia for LNG cargoes.

After weeks of news-driven volatility that pushed the S&P 500 toward its largest monthly decline in a year, traders gained a brief respite. Despite Wednesday's rebound, investors remained cautious as Iran continues attacks on neighboring countries, and multiple officials have signaled that the Islamic Republic is not yet ready for negotiations.

Christophe Boucher, Chief Investment Officer at ABN Amro Investment Solutions, stated, "Risk appetite has improved this morning, which makes sense given the news flow, but for us, it's not yet time to chase the rally. You can almost feel algorithmic trading programs reacting to keywords like 'peace,' 'talks,' and 'ceasefire.'"

**Bets on Central Bank Tightening Increase** The retreat in oil prices prompted traders to scale back expectations for further monetary policy tightening by global central banks. Interest rate swaps now imply less than a one-in-five chance of a Federal Reserve rate hike this year. Meanwhile, the market is pricing in two to three additional rate hikes from the Bank of England. Just on Tuesday, traders were betting on three hikes from the BOE.

European Central Bank President Christine Lagarde pushed back against market expectations for a swift policy response to rising energy prices, suggesting that if the shock is limited and temporary, the ECB could "look through" the impact and refrain from immediate action.

European bonds led gains, with the UK two-year gilt yield falling 6 basis points to 4.40%. Italy and Germany are scheduled to hold government bond auctions on Wednesday.

Following a turbulent week, bond markets rebounded. Market participants will closely watch the U.S. Treasury's auction of $70 billion in five-year notes on Wednesday, after a weak two-year note auction on Tuesday. The yield on the two-year U.S. Treasury note fell 4.7 basis points to 3.888%. The 10-year yield declined 3.6 basis points to 4.354%, while the 30-year yield decreased 1.8 basis points to 4.922%. Analysts at Westpac wrote, "Rising oil prices have fueled expectations of higher inflationary pressures and further monetary policy tightening."

Roberto Scholtes, Head of Strategy at Singular Bank, noted that while bond markets are still signaling more pessimism about the war than equities, "as visibility improves, these two perspectives should converge, likely returning to a more moderate base case scenario."

**Calm in Currency Markets** Currency market volatility was relatively subdued, contrasting with the rebound in equities and the drop in crude prices. The U.S. dollar was largely flat, with the Dollar Index, which tracks the greenback against a basket of six major currencies, last up 0.13% at 99.317. The euro was also little changed at $1.1603.

Chris Weston, Head of Research at Pepperstone Group Ltd in Melbourne, said, "For those reacting to every breaking development between the U.S., its allies, and Iran—including speculation about high-level talks and provisional ceasefire proposals—a sense of fatigue is now clearly setting in."

Gold prices edged higher, briefly surpassing $4,600 per ounce. Analysts at Saxo Bank stated, "The recent sell-off has been primarily driven by liquidity pressures rather than a change in fundamentals."

**Morgan Stanley Forecasts 20% Surge in S&P 500 Earnings** Wall Street sell-side strategists are now raising earnings estimates, looking past concerns about soaring oil prices and potential consumer demand weakness. Data compiled by Morgan Stanley indicates that S&P 500 earnings for the next 12 months are projected to grow by 20%. Historically, such high readings have only been seen when the U.S. economy is emerging from a recession.

In a client note dated March 23, Mike Wilson, Chief Investment Officer and Chief U.S. Equity Strategist at Morgan Stanley, said, "This supports our view that the likelihood of this oil price spike ending the economic cycle remains low."

Optimism regarding corporate earnings—a core pillar of the U.S. stock bull market for much of the past decade—partly explains the resilience of the S&P 500 despite escalating Middle East conflict. This outlook provides bulls with a rationale to stay invested in U.S. stocks, even as geopolitical risks rise, AI disrupts industries, and pressures in private credit emerge.

Wilson pointed out that earnings prospects for S&P 500 companies continue to improve even as stock prices fall—a phenomenon rare during periods of geopolitical uncertainty. Historical experience suggests investors willing to look past short-term pain are often rewarded. The firm's data shows that periods where analysts raise earnings estimates while the S&P 500 declines have typically preceded strong subsequent market performance.

**Stocks in Focus** Gold stocks advanced in pre-market trading. The SPDR Gold Trust ETF rose 3.8%. Newmont Corp. gained 5.8%, Sibanye Stillwater climbed 5.7%, Barrick Gold increased 4.9%, and Harmony Gold advanced 6.2%. Kinross Gold rose 6.3%, while AngloGold Ashanti added 5.3%.

Airline stocks were broadly higher pre-market after United Airlines warned airfares could rise by 20%. United Airlines Holdings gained nearly 3%, American Airlines Group rose 2.7%, Southwest Airlines climbed 2.5%, Ryanair Holdings advanced nearly 2%, and Delta Air Lines increased 1.7%.

Space-related stocks rallied pre-market on reports that SpaceX is nearing a filing for an initial public offering. Destiny Tech100 surged over 17%, EchoStar Corp. gained more than 6%, Momentus Inc. rose over 5%, while AST SpaceMobile, Voyager Technologies, Rocket Lab, Redwire Corp., Intuitive Machines, and Planet Labs PBC all advanced more than 3%.

ARM Holdings jumped over 10% pre-market as it prepares to sell its own chips for the first time.

Robinhood Markets rose 3.5% after announcing a plan to repurchase $1.5 billion of its stock.

Intel Corp. gained 3% and Advanced Micro Devices rose 1.6% on reports of planned price increases for their full CPU lineups.

Tesla Inc. advanced nearly 2% after a video of its Optimus Gen 3 robot was released, with production potentially starting this summer.

Blaize Holdings skyrocketed over 45% pre-market after reporting better-than-expected earnings.

PDD Holdings climbed over 4% after forecasting a 10% year-over-year increase in 2025 revenue.

WeRide.ai continued its advance, rising over 3% pre-market following a Q4 revenue beat and positive analyst coverage.