Global markets rise, European Stoxx 600 up 1.5%
Oil pulls back
Markets closely watching latest Iran war developments
Updates pricing after European morning trade
By Sophie Kiderlin
LONDON, March 10 (Reuters) - Global stocks rose and oil prices fell on Tuesday after U.S. President Donald Trump declared the Middle East war could be "over soon," although defiant comments from Iran’s military cast some doubt over the prospects of a swift resolution.
Europe's STOXX 600 index .STOXX pared some earlier gains but was last still up 1.5% on Tuesday after declining for three consecutive trading days. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose around 3.2%.
Brent oil futures fell as much as 11% to below $88.05 per barrel at one point, before trimming their decline to about 5.6%.
Trump's remarks on Monday injected optimism that contrasted with events in Iran, where hardliners rallied behind new Supreme Leader Mojtaba Khamenei and the Revolutionary Guards said a blockade of oil exports would continue until U.S. and Israeli attacks end. Trump said the U.S. would hit Iran much harder if it blocked exports.
The strong reaction to Trump's remarks "really does highlight how the markets are literally hanging on every word he says," Fiona Cincotta, senior market analyst at City Index, said.
However, uncertainty persists and further volatility could lie ahead, she said.
"The markets remain volatile because they're still being very much headline driven. And that obviously means that any comments can send the market sort of one way or the other," Cincotta said.
On Tuesday, Trump told Fox News it was possible he would talk with Iran, while U.S. Defense Secretary Pete Hegseth said Tuesday would be the most intense day of strikes against Iran in the campaign so far.
A GLOBAL REBOUND?
Steadier investor sentiment triggered a share rebound in Europe and Asia on Tuesday, while government bond yields dipped and interest rate expectations shifted again.
European indexes followed Asia higher to start the day before retracing some gains as the day progressed, with Germany's DAX .GDAXI last up 1.8% and France's CAC 40 .FCHI adding around 1.2%.
Money markets cut the chances of a European Central Bank rate hike this year, after this was more than fully priced in late on Monday, while the benchmark German 10-year bond DE10YT=RR fell around one basis point to 2.8542%.
Rate-sensitive two-year yields fell more sharply, with Germany's down 5 bps. Britain's dropped 6.5 bps to 3.92% after hitting 4.23% on Monday at the height of market worries that surging oil prices would reignite inflation and prompt central banks in Europe to tighten policy later this year.
"Market pricing suggests weeks of disruptions, not days or months," analysts at BlackRock Investment Institute wrote.
"There’s a risk of a stagflationary shock but it’s not a given, as market pricing indicates."
The yield on the U.S. 10-year Treasury note US10YT=RR was last down less than one basis point at 4.126%, having eased more sharply earlier in the day. Traders pushed out bets on the timing of the Federal Reserve's next rate cut, with the first reduction now not seen until July, according to the CME Group's FedWatch tool.
"We are still at troubling levels," ING analysts said, referring to bond yields. "Expect nominal yields to fall for a bit on a reversal trade. But don't expect a dramatic structural rally in bonds," they wrote in a client note.
U.S. equity futures meanwhile turned negative, with S&P 500 e-mini futures EScv1 down 0.3% after having risen around 0.4% earlier.
The U.S. dollar index =USD, which measures its performance against a basket of six major currencies, was last slightly lower at 98.8, extending Monday's sharp fall.
Gold XAU= was up around 0.8% at $5,180.88, while cryptocurrencies rose, with bitcoin BTC= adding 2.1% to $70,453.25 and ether ETH= up 2.3% at $2,052.07.
(Reporting by Gregor Stuart Hunter in Singapore and Sophie Kiderlin in LondonEditing by Jamie, Mark Potter and Tomasz Janowski)
((gregor.hunter@thomsonreuters.com))
