FRANKFURT (dpa-AFX) - For European investors, the return from the weekend is proving to be a rude awakening as the war in Iran continues to escalate. A surging rise in oil prices is increasingly fueling concerns over inflation and economic growth. The focus remains on Iran's appointment of a new Supreme Leader, the son of the late Ayatollah Ali Khamenei. A swift end to the conflict and a normalization of oil production in the region appear nowhere in sight.
At the very least, the Dax does not seem to be collapsing quite as severely as feared early this morning. About an hour before the start of trading, the X-Dax signaled a 2.8 percent slide for the German benchmark index to 22,932 points. Overnight, indications had already fallen as low as 22,705 points. Below the 22,943-point mark seen in November, the Dax is now threatening to hit its lowest level since the spring of last year.
The situation is driven by fears of a prolonged closure of the Strait of Hormuz. The price for a barrel of North Sea Brent crude rose by up to 29 percent to nearly 120 dollars on Monday night. A report in the "Financial Times" is now speculating whether the situation could be calmed by the release of oil reserves. Consequently, the oil price recently retreated back toward the 100-dollar mark.
"The fear that 'black gold' could stall the global economy has grown significantly," wrote expert Christian Henke from the broker IG. U.S. President Trump is demanding an unconditional surrender from Iran, and as a result, the military intervention threatens to last longer. "And this is unlikely to be in the interest of investors," the expert added.
The geopolitically driven flight from risk continues, noted JPMorgan investment strategist Mislav Matejka. However, he reminded investors that the stock market usually finds its bottom when investor sentiment is at its lowest. Accordingly, Matejka would not be surprised if the sell-off ends this week or next.
The volatility triggered by oil prices is evident across many sectors on Monday, following typical patterns. Shares of major oil companies are in high demand in pre-market trading on the Tradegate platform, while tourism stocks are suffering heavily. Lufthansa shares fell by more than three percent in pre-market trading. The fact that Barclays Bank dropped its negative rating for the airline provided little relief, as the analyst had written the study prior to the latest oil price rally.
Relatively minor price losses are looming on Monday for the defense contractor Rheinmetall. In this sector, investors are also looking toward the expected first day of trading for the company Gabler in the Scale segment of the Frankfurt Stock Exchange.
A reshuffling within the Dax index family is also being finalized on Monday. Automotive supplier Schaeffler is now a member of the MDax, as the real estate group Deutsche Wohnen had to leave the mid-cap index. The vacant spot in the SDax small-cap index is being taken by the preferred shares of tool manufacturer Einhell./tih/stk
