Global equities pushed to new highs on Friday as headlines pointed to progress toward a US-Iran deal, though European markets remained trapped in a three-month trading range, according to a Barclays equity strategy report.

The STOXX Europe 600 (SXXP) and Euro STOXX 50 (SX5E) were still trading below their Feb. 27 highs, while the S&P 500 traded 9% above that same threshold, Barclays data showed.

A confirmed deal aimed at reopening the Strait of Hormuz, followed by a drop in oil prices and interest rates, “could lead to broadening of performance and help EU equities to breakout from their trading range of the past three months,” Barclays strategists said.

The gap between war winners and losers within European sectors remained wide. Energy, telecoms, utilities and insurance outperformed since the conflict began, while consumer discretionary, miners and banks lagged. 

Barclays noted the dispersion left room for a short squeeze in consumer and rate-sensitive names, particularly luxury, travel and leisure, autos and retail, should the conflict de-escalate.

Space emerged as the latest hot theme, with European stocks exposed to satellites and aerospace, including Eutelsat, OHB, Avio, AAC Clyde Space, GomSpace and Thales, surging ahead of an expected major IPO in the United States, according to the report.

Barclays flagged that any deal bounce in laggards could prove short-lived. The bank’s macro team expected oil prices to stay higher for longer, keeping inflation risks alive. Historically, however, energy shocks have not had lasting effects on crude prices. 

In this articleUS500+0.58%STOXX50+0.52%TCFP+0.29%ETL-6.10%LCO-1.07%OHBG-0.11%AVI-1.35%GOMX-1.68%AACM+1.74%

“Energy shocks in recent decades have not had a lasting impact on oil, with prices falling sharply once the dust settled and excess supply increasing over time,” Barclays said, something equity market positioning did not appear to be pricing in.

On flows, global equities recorded just $2.4 billion in net inflows in the week, snapping eight consecutive weeks of strong gains, as fixed income attracted $30.5 billion. Year-to-date, fixed income led with $331.2 billion in inflows against $361.0 billion for equities, with the gap narrowing.

Within equities, Europe recorded outflows of $2.3 billion for the week and $2.3 billion year-to-date. 

Europe ex-UK funds marked seven straight weeks of redemptions, down $2.2 billion in the latest week. US-domiciled funds continued pulling money from European equities while European-domiciled funds remained buyers of US equities for nine consecutive weeks.

At the sector level, technology was the only global sector to attract inflows. Industrials and materials saw the sharpest outflows. Within Europe, every sector recorded outflows except healthcare, with financials and energy the weakest.

Key data releases next week include US ISM Manufacturing for May on June 1, with consensus at 53.2 versus 52.7 previously, and US non-farm payrolls on June 5, with consensus at 95,000 versus 115,000 previously, according to Bloomberg consensus estimates cited by Barclays.