A look at the day ahead in European and global markets from Ankur Banerjee

Japan's Nikkei returned from holiday and jumped onto the scorching AI rally, joining South Korea and Taiwan equities at record peaks, while oil prices hovered near $100 per barrel as markets held their breath for a deal to end the Middle East war.

The benchmark Nikkei 225 Index soared nearly 6%, lifting broader Asian gauges to record highs after robust earnings from tech firms fuelled the AI momentum.

The Nikkei is now up 25% this year but lags Seoul's KOSPI's eye-watering 75% surge in 2026, the world's best-performing major stock market which held that crown last year too. Taiwan stocks have risen 45% this year.

In contrast, the tech-heavy Nasdaq is up 11% in 2026 while the S&P 500 is up nearly 8%. In some ways, Asia is where the AI boom is showing up this year.

Just this week Samsung Electronics ( SSNLF ) joined Taiwan's TSMC at the trillion-dollar club. SK Hynix is not far off.

In currencies, the yen was stable in Asian hours at 156.35 per U.S. dollar but traders were left screen-watching as bouts of sudden spikes in the past few sessions spurred speculation about intervention from Japanese authorities.

Sources told Reuters that Tokyo intervened on Thursday last week, with money market data suggesting they sold about $35 billion to support the yen. Since then, the market has seen three abrupt spikes in the yen including on Wednesday, when it hit a 10-week high of 155 per U.S. dollar.

Japan faces no constraints on how often it can intervene in currency markets and is in daily contact with U.S. authorities, its top currency diplomat said on Thursday. Data later in the day could shed light on whether Tokyo had stepped into the market.

In the Middle East, Tehran is considering a U.S. peace proposal that sources said would formally end the conflict while leaving unresolved key U.S. demands that Iran suspend its nuclear program and reopen the Strait of Hormuz.

The crucial waterway has been effectively at a standstill since the war erupted at the end of February, sending oil prices surging and fanning inflation fears.

While the latest news on a possible peace deal weighed on oil prices, they remain at around the $100 per barrel level, well above where they were before the war started. The dollar too was on the back foot as risk sentiment improved.

Britain's local elections on Thursday are in the spotlight for global bond investors, wary that a poor showing for the ruling Labour Party could pave the way to an unwelcome leadership challenge and renew concerns about fiscal slippage.

Key developments that could influence markets on Thursday:

Economic events: April PMI data for Germany, France, UK

(By Ankur Banerjee; Editing by Muralikumar Anantharaman)