30 am, a 1.3% decline from the previous day’s close. Most stocks on the list were trading in the red, with the exception of Rheinmetall and RWE, which bucked the trend.
The sole topic of discussion on the market, according to Jochen Stanzl, chief market analyst at CMC Markets, is the Israeli attack on Iran, which has sent shockwaves through the financial world. “It’s an alarming escalation in the Middle East and many investors may have been caught off guard” he said. “Those who have been looking for a reason to sell their shares and take profits will likely be active today.” It appears the Dax may have seen its year-high just a week ago, at least for the time being.
Meanwhile, the price of oil surged, with a barrel of Brent crude trading at 72.87 US dollars at 9 am German time, a 5.1% increase from the previous day’s close. “Not only will the recent stronger oil export of Iran be out of commission for a while, but we also need to worry that other oil facilities in the region may come under fire if the conflict escalates” Stanzl noted. “The transport of oil through the Strait of Hormuz is also at risk. Although the oil price is no longer as crucial for the German economy as it was a decade or two ago, if the price jumps as sharply as it has, the recently firmer euro may not be able to compensate for the lower import prices.”
Investors are now forced to consider the prospect of two wars and a parallel trade war and reassess the risks. “Gold is heading for a record high, stocks are under pressure and the dollar is rising again. The events of the past hours are leading to a comprehensive risk-off movement among investors” Stanzl said.
The United States had repeatedly tried to dissuade Israel from launching an attack, but to no avail. Now, everything hangs in the balance, depending on the Iranian response. Tehran has apparently sent hundreds of drones towards Israel as a counterattack. “Nobody wants a full-scale fire in the Middle East. The risk, however, has increased noticeably” Stanzl said.
The European common currency, the euro, was weaker on Friday morning, trading at 1.1545 US dollars, with the dollar fetching 0.8662 euros.