European stocks seen as hedge as AI-led rally narrows options

European stocks are drawing fresh attention after JPMorgan Asset Management strategist Karen Ward said the region’s cheaper valuations and easing oil fears create a potential buying window.

Speaking in an interview on Wednesday in Zurich, Ward argued that negative sentiment toward the region has become so widespread that it is now part of the opportunity. She is chief market strategist for Europe, the Middle East and Africa at JPMorgan Asset Management.

Oil retreat and valuation gaps reshape the case

Ward pointed to two market forces that have left Europe looking comparatively inexpensive. One is a pullback in oil prices toward levels last seen in the early stage of the conflict involving Iran, which had raised energy and shipping concerns.

The other is the concentration of equity gains in the artificial intelligence theme across the US and parts of Asia. With those markets benefiting heavily from AI-linked rallies, Ward said Europe has lagged and therefore offers more room for catch-up at current prices.

European benchmarks are still behind major US and Asian indexes year-to-date, reflecting the region’s weaker performance during the period of heightened geopolitical tension. Ward said the valuation discount has already started to shrink as investor expectations shifted last month toward the possibility of a resolution.

Hormuz reopening changes positioning dynamics

Oil prices fell again on Thursday after US President Donald Trump signed an interim agreement aimed at halting the war and reopening the Strait of Hormuz, a critical route for global energy flows. Markets have treated the move as a signal that near-term supply disruptions could be less likely.

Ward said a more durable agreement could push investors back toward the portfolio stance seen before the Iran conflict escalated. In that earlier period, she noted, some market participants were already considering reducing exposure to US assets as doubts grew about how long the AI-driven surge could continue.

In her view, the same two allocation questions are returning to the foreground: where upside is still available when broad markets do not look cheap, and how to reduce reliance on a narrow technology-led story. Ward said Europe can address both aims by offering diversification and a lower starting valuation than the most crowded parts of the global equity market.

Investor hesitation persists after a long underperformance cycle

Despite the improving setup, Ward said many clients remain cautious because Europe’s decade-long lag versus the US has shaped expectations and risk appetite. She described that period of relative weakness as a powerful psychological barrier for investors considering a renewed allocation.

Ward is based in London and advises within JPMorgan Asset Management, which oversees about $4.3 trillion in assets under management. Her comments highlight how quickly the investment narrative can shift when geopolitics, energy prices and sector leadership change at the same time.

For European stocks, the immediate implication is that a sustained decline in oil and clearer evidence that the conflict is stabilizing could accelerate rotation flows. The next steps for investors will likely hinge on whether the interim ceasefire framework holds, and whether global equity leadership broadens beyond AI-heavy segments.