European stocks soar amid growing optimism for U.S.-Iran peace deal

European stocks soared on Wednesday as traders responded to reports that the U.S. and Iran are close to an agreement that will bring an end to the war.

Two U.S. officials and two other sources briefed on the issue told Axios that the White House believes it is nearing a one-page, 14-point memorandum of understanding to end the war and establish a framework for more detailed nuclear talks.

A spokesperson for Iran's foreign ministry told CNBC that Tehran is "evaluating" a 14-article peace proposal from the U.S. administration.

The pan-European Stoxx 600 index was last trading 2% higher. London's FTSE 100 gained 2.2%, bouncing back from heavy losses on Tuesday, while France's Cac 40 and Germany's Dax added 3.1% and 2.3%, respectively.

All major bourses and sectors, except oil and gas stocks, were seen trading in the green. The euro rose 0.65% against the dollar upon the news before paring gains.

Wednesday's breakthrough followed President Donald Trump's prior announcement pausing "Project Freedom," the U.S. plan to "guide" ships through the Strait of Hormuz. In a Truth Social post, he cited "the fact that Great Progress has been made toward a Complete and Final Agreement with Representatives of Iran," as a driver behind the decision.

Iran's foreign minister Abbas Araghchi met Chinese foreign minister Wang Yi in Beijing on Tuesday, according to state media. China has been called upon by Trump's advisors to pressure Iran into re-opening the Strait of Hormuz, the vital shipping route for oil and gas. 

Markets are set to bounce back from Tuesday's volatility, as a fragile ceasefire between the U.S. and Iran appeared to be close to collapse after the United Arab Emirates came under attack from Iranian drones and missiles, and the White House said it sank Iranian boats in the Strait of Hormuz. 

Overnight, South Korea's Kospi index advanced 6.5% to scale a new peak, topping 7,000 as it builds on gains of more than 70% this year so far. 

Index heavyweight Samsung Electronics reached a record high, rising over 15% to exceed $1 trillion in market capitalization. SK Hynix also reached an all-time high, gaining more than 10%. 

Novo Nordisk hiked annual profit guidance on Wednesday, as the pharmaceutical group revealed its blockbuster weight-loss drugs performed better than expected in the first three months of the year.

The results covered sales of Novo's oral weight loss drug, the Wegovy pill, in the U.S. sales of the pill amounted to 2.26 billion kroner, well above analyst estimates compiled by Reuters of 1.16 billion kroner. Novo shares were last seen 4.9% higher.

Pandora shares popped 12.7% after first-quarter sales beat analyst expectations, despite weak consumer sentiment in the U.S. weighing on results.

The Danish jeweler has been under pressure from the Trump administration's import tariffs and a surge in the price of silver, weighing on margins. It announced on Wednesday it would be applying for tariff reimbursement under the International Emergency Economic Powers Act in the U.S.

— CNBC's Justina Lee also contributed to this report.