Key Moments
- Deutsche Bank moved its view on U.S. vs European equities to neutral. It reacted to a preliminary U.S.-Iran agreement and lower geopolitical risk.
- A memorandum of understanding is expected on Friday in Switzerland. At the same time, markets expect the Strait of Hormuz to reopen.
- In addition, Deutsche Bank sees the earnings gap between U.S. and Europe narrowing. As a result, Europe’s relative appeal may improve.
Deutsche Bank Shifts View on U.S. and European Stocks
Deutsche Bank moved its equity stance to neutral on Monday. It reduced its earlier preference for U.S. stocks over European equities.
The bank said geopolitical conditions are improving. In particular, it pointed to a preliminary U.S.-Iran agreement that could reopen the Strait of Hormuz.
According to U.S. President Donald Trump, the deal is now complete. He made the statement on his Truth Social account on Sunday evening.
Meanwhile, Pakistani Prime Minister Shehbaz Sharif confirmed the agreement. His country acted as a mediator during the talks.
U.S.-Iran Agreement and Market Impact
The memorandum of understanding is expected to be signed on Friday in Switzerland. After that, the Strait of Hormuz is expected to reopen.
Trump also said the U.S. would end its blockade of Iranian ports. This would take effect once the agreement is finalized.
At the same time, Iran’s Supreme National Security Council confirmed a ceasefire. It said military activity would stop across all fronts, including Lebanon.
However, officials did not release full details of the deal.
Implications for Equity Markets
Deutsche Bank said the new geopolitical outlook changes its earlier strategy. At the start of Q2, it favored U.S. equities over European stocks.
That view was based on three factors. These included Europe’s exposure to the Strait of Hormuz, strong U.S. tech performance, and a widening earnings gap.
Now, the bank sees those drivers weakening. As a result, its stance has shifted to neutral.
Strategists led by Maximilian Uleer said U.S. equities have already outperformed European stocks. However, they warned that momentum may slow.
They added that a reopening of the Strait would improve Europe’s appeal. In addition, they expect the earnings gap to narrow over time.
| Factor | Original U.S. Advantage | New Outlook |
|---|---|---|
| Strait of Hormuz exposure | Europe seen as more exposed | Risk expected to decline for Europe |
| U.S. tech strength | Key driver of U.S. outperformance | Already strong; upside may slow |
| Earnings growth gap | Favorable for U.S. equities | Gap expected to narrow |
Sector Trends and Outlook
Deutsche Bank also reviewed sector performance. It noted that consumer-related sectors have been weak since the conflict began.
Autos, Staples, and Luxury stocks were among the worst performers. Higher inflation and oil prices pressured these sectors.
In addition, interest rates and weak sentiment added pressure.
However, the bank said conditions could improve if the Strait of Hormuz reopens. Even so, it did not change its sector ratings yet.
Instead, strategists said they will wait for clearer signals before making new calls.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
