A 10-day ceasefire between Lebanon and Israel took effect on Thursday, and President Donald Trump stated that the next meeting between the US and Iran could take place over the weekend, coinciding with the scheduled expiration of the current truce.
US and Iranian negotiators have scaled back their ambitions for a comprehensive peace deal and are now seeking a temporary memorandum to prevent a resumption of hostilities, although the nuclear issue remains a fundamental hurdle.
Nevertheless, on a global scale, investors have been quick to adopt an optimistic outlook at any sign of a resolution this month -- with oil trading below 100 dollars a barrel and Asian markets near record highs -- despite the fact that the Strait of Hormuz, through which a fifth of the world's oil and gas supply typically flows, remains virtually closed.
An eventual 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.
"We remain (...) in a scenario of uncertainty, awaiting talks between the parties, despite Trump's optimistic statements," Renta 4 said in a note to clients.
European stock markets were mostly trading flat, in line with the Spanish benchmark.
"We could see some profit-taking following the gains accumulated throughout the month. As the end of the conflict is increasingly confirmed, markets will price this in with further rallies," Bankinter analysts noted on their Telegram channel.
At 0708 GMT on Friday, Spain's blue-chip IBEX 35 was up 10.00 points, or 0.03%, at 18,094.50 points, pointing to a weekly loss of 0.6% after three consecutive weeks of gains.
In the banking sector, Santander rose 0.30%, BBVA gained 0.20%, Caixabank shed 0.23%, Sabadell climbed 0.49%, Bankinter added 0.14%, and Unicaja Banco rose 0.21%.
Among non-financial heavyweights, Telefónica gained 0.86%, Inditex advanced 0.08%, Iberdrola slipped 0.13%, Cellnex rose 0.20%, and the oil major Repsol climbed 0.48%.
The pan-European FTSE Eurofirst 300 index was down 0.07%.
(Reporting by Benjamín Mejías Valencia; editing by María Bayarri Cárdenas)
