Beata Manthey, head of European equity strategy at Citigroup, forecasts European stocks could rise 5% by year-end driven by "an explosion of earnings" in recent reporting seasons. She believes stocks can climb despite higher bond yields as long as inflation stays controlled and purchasing manager indexes remain solid.

Europe faces greater exposure to higher oil prices than other regions, prompting Citigroup to shift toward US stocks. Manthey notes the energy sector's earnings surge offsetting downgrades elsewhere, though market gains have occurred "in this very narrow fashion."

The strategist recommends technology, materials and financials via banks while cautioning about frothiness around artificial intelligence. A Middle East ceasefire would trigger a squeeze in European equities as underweight investors rush in, with Citigroup maintaining its bullish stance amid these geopolitical tensions.