European Midday Briefing : Middle East Uncertainty Keeps Investors Cautious

MARKET WRAPS

European indexes were down Friday, despite software giant SAP's more than 6% jump following earnings .

Energy stocks also rose as oil climbed for a fifth-straight day, with front-month Brent crude oil on track for its largest weekly gain since the first week of the war.

The Strait of Hormuz remained shuttered and neither the U.S. nor Iran signaled a return to peace talks in the near term.

"The longer the Strait remains shut, the greater the oil shock and the more distant the idea of Brent crude trading back to levels near $80 or below, " ING said.

"This view is very much dominant in the interest rate market, where short-dated yields remain very firm on the view that many central banks will have to react to this inflationary shock."

Near-term focus was on the European Central Bank meeting next week, where interest rates are highly likely to be left unchanged.

"The central bank thus gains time to carefully analyze the latest macroeconomic data and geopolitical developments --particularly in connection with the Middle East conflict--and weigh them against its previous projections," BayernInvest said.

U.S. Markets:

Stocks looked mostly set to rise on Friday following falls in the last session, with strong results from SAP and Intel after Thursday's close helping reassure investors.

Still, investors may be reluctant to make major moves until megacap tech companies Meta Platforms, Alphabet, Amazon, Microsoft, and Apple report next week.

Forex:

The euro wouldn't necessarily rise if markets increase bets for the ECB to raise interest rates in June, ING said.

"The ECB needs to get ahead of inflation expectations to help the euro, not merely match them."

Two-year real interest-rate differentials adjusted for inflation aren't particularly supportive for the euro versus the dollar rate right now,it said.

The dollar rose.

Sterling was little moved , remaining weaker against the dollar and flat versus the euro, after U.K. retail sales data exceeded expectations.

Bonds:

Eurozone government bond yields rose, tracking Treasury yields, as oil prices remained elevated in the absence of meaningful progress toward a resolution in the Middle East.

Eurizon said emerging-market debt could continue to outperform developed-market bonds in 2026 in a scenario of a softer dollar and stable or declining Treasury yields.

SocGen expects the ECB to deliver two interest-rate hikes this year and the 10-year Bund yield to stay above 3% this year.

SocGen said separately that any meaningful selloff in the front end, including two-year Treasurys, was a buying opportunity.

Mediolanum's base case is that the ECB doesn't push back on current market pricing.

"However, if the ECB places greater emphasis on downside growth risks or signals a willingness to look through higher inflation for a period, there is scope for yields to retrace lower."

Energy:

Oil rose, with Brent crude above $105 a barrel.

"Oil trades higher for a fifth day, with no apparent end in sight to the Middle East stalemate," Saxo Bank said.

Metals:

Gold fell as increased energy prices raised fears of inflation and expectations that central banks will keep interest rates elevated for longer.

Gold Chart

Comex gold futures' bearish momentum seemed to be picking up pace again, based on the daily chart, RHB said, adding that the commodity was likely to pull back toward $4,600 to form a consolidation base.

EMEA HEADLINES

German Business Sentiment Dives to Lowest Since 2020 as War Hits Outlook

German business confidence sank to a near six-year low as firms counted the cost of soaring energy prices driven by the conflict in the Middle East.

The Ifo Institute said Friday that its business-climate index, based on around 9,000 monthly responses from businesses, fell to 84.4 in April from 86.3 in March.

U.K. Consumer Sentiment Dragged Further by Iran War

U.K. consumer sentiment continued to tumble this month, with concerns mounting over the economy as tensions in the Middle East drag on.

Consumer confidence fell four points to minus 25 in April, the biggest fall in a year and the lowest reading since October 2023, according to research group GfK's barometer, published Thursday with the Nuremberg Institute for Market Decisions.

Eni Hikes Buyback as Higher Energy Prices Offer Cash Windfall

Eni nearly doubled its share buyback target as conflict in the Middle East upends energy markets, pushes prices higher and is expected to give oil majors a cash windfall.

War in the Middle East has severely disrupted the flow of oil and gas from the region, driving market volatility and pushing energy prices up.

GLOBAL NEWS

Japan's Central Bank Confronts Two-Way Risk Fueled by War in Middle East

TOKYO-The Bank of Japan is once again in a tough spot, facing a fresh geopolitical challenge that's fueled two-way risks for Japan's economy.

War in the Middle East has complicated the BOJ's interest-rate path. While the central bank remains committed to tightening, uncertainty around the conflict's economic impact has forced policymakers to be even more cautious than usual in ensuring that a rate hike won't derail Japan's fragile domestic recovery.

Dollar Moves Are Being Driven by Geopolitics, Not Data. What Comes Next.

With the dollar's early war premium largely faded, the trajectory of the conflict in Iran is now a bigger driver than underlying economic data.

The U.S. dollar index-a gauge measuring the dollar's value against its key rivals-rose 2.41% in March, when uncertainty about the war was at its peak. In the currency market moves are typically small, and this monthly gain marked the dollar's largest rise since July 2025. As the initial scare from the war subsided, the dollar has fallen 1.34% so far in April.

Iran War Complicates Contingency Plans to Defend Taiwan, Some U.S. Officials Say

WASHINGTON-The U.S. has burned through so many munitions in Iran that some administration officials increasingly assess that America couldn't fully execute contingency plans to defend Taiwan from a Chinese invasion if it occurred in the near term, U.S. officials said.

The U.S. has fired more than 1,000 long-range Tomahawk missiles since the war with Iran began on Feb. 28, as well as 1,500 to 2,000 critical air-defense missiles, including Thaad, Patriot and Standard Missile interceptors, according to U.S. officials who declined to give exact figures.

Trump Administration Reclassifies Marijuana as Less Dangerous Drug

WASHINGTON-The Trump administration is reclassifying marijuana as a less dangerous drug, a significant policy shift that could make it easier to buy and sell pot and reward investors in the multibillion-dollar cannabis industry.

Acting Attorney General Todd Blanche signed an order Thursday that began the process of moving marijuana out of the government's most restrictive drug classification. Marijuana has been classified as a Schedule I drug since 1970, alongside LSD and heroin. The action downgrades marijuana to Schedule III, making it obtainable for medical reasons with a prescription.

The Priceless Treasures Fueling Sudan's Bitter Civil War

Rebel fighters in Sudan's civil war have landed on a lucrative way to funding their brutal campaign: looting the country's museums.

Historians and curators say the Rapid Support Forces that have been fighting government forces for the past three years are now targeting Sudan's rich cultural history and selling it to the highest bidder in the illicit international art market. Across the country, their fighters have joined private looters in stripping museums of valuable artifacts chronicling the country's history from the Stone Age to the rise of Islam.

U.S. Soldier Charged With Using Classified Information to Bet on Maduro's Ouster

Federal authorities on Thursday charged a U.S. Army soldier who took part in the operation to capture Nicolás Maduro with using classified information to reap more than $400,000 from bets on the former Venezuelan leader's ouster.

Gannon Ken Van Dyke was charged in Manhattan federal court with commodity and wire fraud, according to the Justice Department. Prosecutors alleged that Van Dyke, a master sergeant with the U.S. Army Special Forces, misused information about the operation to make well-timed bets on Polymarket that Maduro would lose power by the end of January. Maduro was captured by the U.S. in early January.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

04-24-26 0521ET