FRANKFURT (dpa-AFX) - The German benchmark Dax index could continue to defy geopolitical concerns and inflation fears in the coming week. 'Confidence still prevails in the equity markets, particularly regarding US exchanges,' wrote analyst Claudia Windt of Landesbank Hessen-Thüringen (Helaba).

According to the Helaba expert, enthusiasm surrounding Artificial Intelligence remains a pillar of support, even if the rally has recently stalled in the semiconductor sector. Furthermore, the ongoing uncertainty regarding the conflict in Iran is increasingly failing to trigger a significant rise in risk aversion across financial markets.

Ulrich Kater, Chief Economist at Dekabank, is somewhat more skeptical: 'Geopolitical imponderables naturally remain relevant.' He noted that recurring optimism over progress in US-Iran talks is being countered by uncertainty surrounding the fragile ceasefire between Israel and Lebanon.

The situation in the Middle East is currently a critical factor for oil price trends and, consequently, inflation outlooks. Should the Strait of Hormuz, vital for global trade, remain de facto blocked by Iran, the price of a barrel (159 liters) of North Sea Brent crude is likely to remain elevated over the long term. This carries the risk of a cost shock for the entire economy, as higher transport, production, and energy expenses could increasingly drive up general price levels and ultimately dampen consumer purchasing power.

Against this backdrop, Kater believes financial markets will focus particularly on Thursday's European Central Bank (ECB) meeting. While a 0.25 percentage point hike in key interest rates appears certain, uncertainty regarding the future monetary policy path remains high. 'If the European Central Bank's communication emphasizes that the impact of crude oil continues to permeate inflation forecasts, the door remains open for a more restrictive monetary policy landscape,' Kater wrote.

In addition to the rate decision, the focus is expected to be on the ECB's new projections and statements from President Christine Lagarde, according to Commerzbank analyst Pascal Reichert. Since several speakers have already suggested that the 'adverse' scenario presented at the March meeting seems to best reflect the current situation, the ECB might potentially revise its scenario analysis alongside its inflation and growth projections. These should help provide guidance to the markets.

As early as Wednesday, attention will turn to US consumer price data for May. Beyond energy and food prices, the conflict in Iran is likely to have been reflected primarily in airfares, wrote Commerzbank economist Ralph Solveen.

Overall, the inflation figures will certainly keep the debate alive as to whether the US Federal Reserve will raise interest rates due to inflationary risks, Solveen summarized. The significantly stronger-than-expected increase in US payrolls recently pointed toward monetary tightening, at least toward the end of the year. The Fed's next interest rate decision is expected on June 17.

On the corporate front, Heidelberger Druckmaschinen will present its annual results on Wednesday. On Friday, Frankfurt airport operator Fraport will release traffic figures. However, the final day of the week will be dominated by the anticipated record-breaking initial public offering (IPO) of Elon Musk's space company, SpaceX. Since the multibillionaire has also integrated his AI firm xAI into the company and the IPO is met with high global expectations, the event could also create waves in the domestic market./la/jsl/he

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