GLOBAL MARKETS-Stocks edge up as oil hovers near 3-month lows ahead of Warsh debut

Global oil prices edged up on Wednesday, despite Brent crude falling to near three-month lows, as reports of potential US sanctions relief on Iranian oil boosted supply optimism.

Stocks edged up and currencies were subdued on Wednesday ahead ‌of ​Kevin Warsh's debut as Federal Reserve chair, while oil prices remained near three-month lows, easing inflation pressure and pushing bond yields lower. Brent crude fell as far as $77.75 a barrel, down more than a third from April peaks after reports the United States may waive sanctions on Iranian oil under a deal to end the war. It was last ‌up 0.4% at $79.29. The prospect of extra supply added to optimism about the resumption of Middle East exports that has helped push U.S. Treasury yields lower this week, alongside a rally in global bonds, even as the conflict has drained strategic oil reserves.

"Iran's total exports could approach around the equivalent of 2% of global demand," said Luka Belobrajdic, an economist at Westpac, though he cautioned any sanctions relief is unlikely to be immediate and would depend on the durability of peace. The ‌International Energy Agency said the oil market will move into a significant supply surplus in 2027 after recovering from the closure of the Strait of Hormuz. Cooling inflation expectations lifted euro zone government bonds for a fifth day, ‌their longest rally since February, driving 10-year German yields, the bloc’s benchmark, to their lowest since early April. British yields fell sharply after May inflation unexpectedly held at a 13-month low of 2.8%, a day before the Bank of England's next rate decision. U.S. Treasury yields edged up 1.7 basis points to 4.44%, but remained about 22 bps below their May peak.

Few details of the U.S.-Iran agreement, due to be signed on Friday, have been publicly confirmed, and a three-month stranglehold on the Strait of Hormuz has U.S. oil reserves at their lowest point since 1983. Uncertainty lingered. ⁠U.S. President Donald ​Trump said the agreement reached this week was not final ⁠and that he could resume a bombing campaign. Falling oil prices could ease concerns about an economic slowdown in energy-importing Europe, where stock markets have lagged tech-heavy Wall Street indices this year.

"Lower prices could lead to a recovery in manufacturing and consumer sentiment," wrote Deutsche Bank strategist Maximilian Uleer, ⁠dropping his preference for U.S. stocks over Europe. The pan-European STOXX 600 rose 0.3%, staying close to Monday's record. Shares in BMW fell 7% after the German automaker slashed its 2026 outlook, citing a downturn in China and the impact of the U.S.-Israeli war on ​Iran.

The FTSE 100 was unchanged. U.S. CHIP STOCKS REBOUND

Wall Street futures pointed to a bounce in tech stocks after heavy losses among U.S. chipmakers, as volatility resurfaced in the sector after a record-breaking run. Shares ⁠of chipmakers including Broadcom, Micron, AMD and Intel rose between 1.5% and 3.5% in premarket trading. SpaceX rose almost 3% after Elon Musk's AI and rocket company surpassed Amazon's market value on Tuesday to become the fifth most valuable company.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3% and in China, ⁠AI ​gains offset sagging consumer stocks in the wake of weak retail sales data. FED ON HOLD, WARSH IN FOCUS

Traders are waiting to see how Warsh walks the line between his dovish president and the markets, which expect a hike this year. The anticipation has broadly held the dollar in stasis. The euro has firmed only a little this week to hover around $1.16. Tuesday's rate hike in Japan failed to lift the yen, though the downside was protected ⁠by the risk of official intervention, holding it at 160.3 to the dollar. A change in the Fed funds rate is unlikely, so the focus is on the press conference, Warsh's vote and committee members' projections, which in ⁠March showed most expected to cut rates.

"I don’t have ⁠either cuts or hikes on my radar in the next 12 months," said Arne Petimezas, director of research at Dutch broker AFS Group. "If Warsh is going to hike, which is where I think the risks are, it will be more than just one hike." Sweden's Riksbank kept its policy rate unchanged, but forecast a possible hike ahead. Gold, down ‌more than 20% from January peaks, ‌has bounced strongly from support at around $4,000 an ounce and was last at $4,323. Bitcoin was down 1.6% at $64,716.