Global Economy
European Markets Dip as Middle East Tensions Resurface
European stock markets are set to open lower on Tuesday, reversing Monday's gains as investors reassess the situation following conflicting signals from the U.S. regarding Iran. Despite a brief relief rally after President Trump's announcement of potential talks with Tehran, concerns over the ongoing conflict and the closure of the Strait of Hormuz are pushing oil prices higher again, dampening risk appetite.
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European Markets Set for Decline as Middle East Tensions Resurface
European stock markets are poised to open lower on Tuesday, reversing the brief rebound seen on Monday. Investors are pulling back after the U.S. announced it was postponing threats to target Iranian power plants, while also claiming to be in talks with Tehran—a claim denied by Iran.
According to early indicators, the French CAC 40 could open down 0.12%. Futures point to a 0.28% drop for Germany's DAX, a 0.18% decline for the UK's FTSE, and a 0.35% fall for the pan-European Stoxx 600.
President Trump's latest U-turn, which hinted at a possible de-escalation, triggered a strong stock rally and a sharp drop in oil prices on Monday. However, caution is expected to return on Tuesday as crude prices rebound amid ongoing conflict and the de facto closure of the Strait of Hormuz, a critical passage for global oil shipments.
Iran has denied holding talks with the U.S. to end the conflict, accusing the White House of trying to "buy time" amid market jitters. "Even if tensions were to ease following Trump's announcement, we expect a floor of $85-90 and a natural return towards the $110 range until the Strait of Hormuz reopens," said Macquarie in a client note.
Macquarie added that Brent crude could hit $150 per barrel if the strait remains closed until the end of April. Brent is up 2.78% at $102.72 a barrel, while West Texas Intermediate (WTI) gains 3.44% to $91.16.
Increased investor caution is also affecting sovereign bonds, whose yields sharply reversed lower after Trump's comments but are now climbing again on inflation fears and expectations of tighter monetary policy from central banks.
Energy sector leaders, meeting Monday at a Houston energy conference, expressed concern about the long-term economic impact of a prolonged conflict.
Investors will get an early read on the war's economic impact on Tuesday with the release, after the opening bell, of preliminary Eurozone PMI data on economic activity.
Source: Reuters