Global stocks have gained and oil tumbled as fresh hopes of a peace deal between Iran and the US fanned a rally, while investors await the eagerly anticipated market debut of Elon Musk's SpaceX once Wall Street opens.
European stocks gained more than 1.5 per cent in early trading on Friday following strong gains in Asia, although Wall Street futures pointed to a more subdued, broadly flat opening.
Oil futures were down about 2.5 per cent after US President Donald Trump said a peace deal could be signed as soon as the weekend, even as Tehran said it had not made a final decision on a pact.
Trump has repeatedly said a deal with Iran to end the war was close since mid-March.
This time, the indication that diplomacy was continuing productively was enough for the market to latch on to, Michael Nizard, head of multi-asset at Edmond de Rothschild Asset Management, said.
"The market remains very sensitive to the peace deal and the numerous and various declarations from Trump," Nizard said.
"Today, I think the (potential for) peace is well under-priced."
The huge SpaceX IPO also has the potential to set the tone for global markets, given its large allocation to everyday investors that can make more short-term decisions, Nizard said.
"This is a very important market event ... the retail market is very important for gaining momentum."
The SpaceX IPO raised a record $US75 ($A106) billion, valuing the rocket and spacecraft manufacturer at $US1.77 trillion and making Musk the world's first trillionaire.
The Middle East peace deal, if confirmed, would be the most significant diplomatic breakthrough yet to end the three-month-old war, which sent global energy prices sharply higher.
The European Central Bank had to raise interest rates for the first time in nearly three years on Thursday to nip war-driven inflation in the bud.
Final inflation data from several European countries including France and Spain showed inflation accelerated in May, while official data showed Britain's economy contracted by 0.1 per cent in April - its first monthly drop since August.
Oil prices slumped to two-month lows on expectations of an impending agreement.
Brent crude futures dropped 2.5 per cent at $US88.15 a barrel.
Treasuries held on to gains as hopes of a peace deal in the Gulf led markets to trim bets of a rate hike from the Federal Reserve in 2026.
Two-year Treasury yields were steady at 4.0537 per cent on Friday, while benchmark 10-year Treasury yields were at 4.814 per cent.
The dollar was broadly flat after overnight losses.
It rose 0.2 per cent to 160.27 yen, after retreating 0.4 per cent in the prior session.
Traders are still on high alert for intervention from Japanese authorities as the yen stays close to the 160 level that many see as a line in the sand.
Precious metals retreated on Friday.
Spot gold slipped 0.8 per cent to $US4,181 an ounce, following a 3.5 per cent jump overnight.
