Market strategists have issued the most bullish September forecast for European stocks since 2018, with the Stoxx Europe 600 Index projected to finish the year at 670 points, implying a 5% gain from Wednesday's close. The median target from 16 strategists polled by Bloomberg reflects confidence that strong earnings growth and government spending will offset high energy prices and rising bond yields. Panmure Liberum remains the biggest bull, predicting 10% gains, while Societe Generale SA is the most bearish at 600 points.

HSBC's Duncan Toms cites improving macro data and a potential strong Q3 earnings season as catalysts. European equities have fallen 2.7% from August peaks due to oil prices above $100 a barrel and the unresolved Iran war, with the Strait of Hormuz effectively closed. The ECB has turned more hawkish, with markets pricing in three more rate hikes by June, while the Bank of England faces four hikes by July 2025.

Risks include AI trade unwinding, US midterms, tariff tensions, and low European gas inventories. Despite volatility, optimism persists on bright earnings growth, strong macro backdrop, and German fiscal stimulus kicking in.