FRANKFURT (dpa-AFX) : The prospect of a forthcoming framework agreement between the U.S. and Iran regarding the Middle East conflict could support the German stock market in the coming week. "Investors are now fanatically clinging to the hope that the fatal situation at the Strait of Hormuz will finally ease," wrote analyst Frank Sohlleder of the trading house Activtrades.

Iran has effectively blockaded the strait, a vital artery for global trade, causing oil prices to skyrocket. Should the Strait of Hormuz fully reopen under a framework agreement, crude oil prices could see a further and massive decline. According to Sohlleder, this would immediately tackle stubborn inflation at its root and quickly offset the impact of the European Central Bank's (ECB) most recent interest rate hike.

On Thursday, the ECB implemented its first rate increase in nearly three years to combat the inflationary surge resulting from the conflict with Iran. However, the move is considered delicate, as higher interest rates increase borrowing costs for consumers and companies, which could dampen demand and further weaken an already fragile domestic economy.

In the coming week, members of the U.S. Federal Reserve must assess the impact of the geopolitical situation and economic developments on inflation and the labor market. The meeting will be chaired by the new head, Kevin Warsh.

Analyst Patrick Franke of Landesbank Hessen-Thüringen (Helaba) does not expect the Fed to announce a rate hike. Warsh has repeatedly spoken out against making premature commitments. Consequently, he is unlikely to push for a clear signal regarding future meetings.

Warsh and other Fed policymakers are likely hoping for a swift end to the blockade in the Persian Gulf and a subsequent tangible easing of price pressures, Franke continued. However, the longer the supply chain disruptions caused by the conflict persist, the greater the risk that the U.S. central bank will find monetary tightening unavoidable.

On balance, the environment for the German stock market remains favorable for now. DZ Bank recently raised its year-end target for the benchmark Dax index from 25,000 to 27,500 points. This would easily surpass the record high of nearly 25,508 points reached in mid-January.

DZ Bank's primary scenario is based on the assumption of a de-escalation in the Persian Gulf, as a relaxation of tensions is in the interest of both parties. On the Iranian side, the blockade has caused foreign exchange earnings to collapse, as oil exports constitute the bulk of its trade. On the U.S. side, according to Henseler, energy prices and rising living costs are weighing on the U.S. President's approval ratings.

In this environment, markets are generally being driven by the expansion of infrastructure surrounding Artificial Intelligence, wrote analyst Birgit Henseler. Currently, the record-breaking IPO of Elon Musk's space company, SpaceX, is also fueling market sentiment.

Regarding the domestic equity market, significant price movements could occur on Friday, which marks another "triple witching" day. On this day, derivatives contracts on stocks and indices expire on the futures exchanges, which can trigger volatility.

Also on Friday, the home improvement and building materials group Hornbach Holding will publish its quarterly results. By midweek, attention will turn to Commerzbank shares. At midnight on Tuesday, the offer from the major Italian bank Unicredit for its German competitor is set to expire.

Unicredit launched a takeover bid for Commerzbank in early May, offering its own shares in exchange. According to its own data, Unicredit had been tendered 11.22 percent of all Commerzbank shares by Thursday, even though the calculated value of the offer sits below the current market price of a Commerzbank share.

This would mathematically increase Unicredit's stake to over 37 percent, in addition to more than 3 percent of Commerzbank shares secured through call options and other financial instruments. Commerzbank recently involved the financial regulator Bafin, alleging "foul play" regarding Unicredit's disclosures.

The Frankfurt-based bank criticizes that the tendered shares originated predominantly from banks and affiliated parties, some of whom are known counterparties of Unicredit for financial instruments, rather than independent investors. Unicredit has rejected the allegation, stating it is acting in accordance with legal requirements and maintains a transparent dialogue with Bafin. /la/jsl

--- By Lutz Alexander, dpa-AFX ---