European markets rally on strong earnings and easing geopolitical tensions

European equity markets have seen a resurgence driven by strong second-quarter corporate earnings and easing geopolitical tensions. Corporate earnings across the region are on track for a 22% year-on-year growth, significantly exceeding previous forecasts. Major performers include WPP, Deutsche Telekom, BNP Paribas, UBS, and Shell.

Geopolitical developments, specifically hopes for renewed diplomacy between the US and Iran which could influence the status of the Strait of Hormuz, have contributed to falling oil prices and increased investor confidence. This has positioned European stocks as a strategic alternative to volatile technology shares.

In the private markets, the second quarter of 2026 saw stabilization in European direct lending and private equity. While public credit spreads tightened, investors have become more selective. High-quality borrowers benefit from competitive financing, whereas sectors such as IT services and software face higher risk premiums due to AI exposure and cyclical risks.