Major European stock markets are expected to open lower on Thursday morning amid risk aversion triggered by a new surge in oil prices, as the conflict in the Middle East and its implications for the global economy remain the main concern for investors. Futures contracts currently indicate a 0.9% drop for the Paris CAC 40, a 0.5% decline for the Frankfurt DAX, and a 0.1% decrease for the London FTSE.
Caution prevails due to the lack of hopeful signs for a diplomatic resolution to the armed conflict in Iran, coupled with the threat of slowed growth and accelerated inflation resulting from soaring commodity prices. The downward trend in European indices continues, erasing some gains made during a strong rebound on Tuesday.
American markets closed Wednesday’s session mixed, with the Dow Jones dropping 0.6%, the S&P 500 down nearly 0.1%, and the Nasdaq 100 almost unchanged. The VIX, known as the “fear index” on Wall Street, remains above 24, signaling high stress levels in the market.
The volatility in oil markets in recent days reflects uncertainties surrounding the duration of the war and the potential for an energy crisis that could have long-lasting effects on markets. Despite the International Energy Agency’s decision to release 400 million barrels of oil from emergency reserves to address disruptions from the Middle East conflict, oil prices continue to climb.
The ongoing rise in oil prices, despite these measures, indicates a deeper underlying issue, according to strategist Michael Brown. Concerns are heightened by doubts over the possibility of a swift resolution to the conflict, despite optimistic remarks from President Trump yesterday.
Oil prices are currently surging, with Brent rising over 6% to $97.6 per barrel and WTI gaining 5.7% to $92.2. Observers worry that the rollercoaster movements may not be over, as Oman evacuates ships from its main oil terminal as a precaution.
Analyst Ahmad Assiri notes that the weekly volatility in oil markets has reached historic highs, reflecting extreme uncertainties driven by urgent headlines. The situation has led traders to factor in a complex and enduring geopolitical reality, pushing oil prices back above $100 per barrel.
Geopolitical tensions benefit the yen and dollar in the currency market, leading to a decline in the euro against other major currencies. The euro’s weakness signals anticipation of prolonged uncertainty for the Eurozone economy and ECB monetary policy.
With geopolitical developments and rising inflation expectations, US bond yields are increasing, with the ten-year yield surpassing 4.20%. European bond yields, such as Germany’s Bund and French OATs, are also rising to their highest levels since late 2023.
As geopolitical factors continue to influence market direction, investors will closely watch US jobless claims data and the latest US housing market figures at 14:30 GMT.
