FRANKFURT (DEUTSCHE-BOERSE AG) - The conflict between Israel and Iran is fueling uncertainty. Oil prices are climbing, stock markets are sliding. Central banks are unlikely to be able to do much to counter the growing skepticism this week.
June 16, 2025. FRANKFURT (Frankfurt Stock Exchange). The latest geopolitical tensions have shifted the focus on the stock markets. "Events in the Middle East will take center stage in the coming days, with investors keeping a close eye on a possible further escalation between Israel and Iran," writes Deutsche Bank. Last week, the price of oil (Brent Crude Oil: +12 percent) rose significantly, while the stock markets were dominated by losses.
The DAX lost 3.2 percent over the week, while the Stoxx Europe 600 lost 1.6 percent. Nevertheless, gains of 18 and 7 percent have been recorded since the beginning of the year. On Monday morning, the DAX stood at 23,410 points after closing at 23,516 points on Friday. The major US indices, the S&P 500 (-1.1 percent) and Nasdaq 100 (-1.3 percent), closed lower on Friday, postponing their assault on new record highs. In the Middle East, Israel and Iran launched new attacks against each other over the weekend. In addition, the resumption of talks between the US and Iran on a nuclear agreement scheduled for Sunday was canceled.
Too much optimism and too high valuations
Many on the stock markets assume that the correction that has begun on the stock markets will continue. "With the return of geopolitical risks, investors seem to be preparing for further setbacks. These are likely to provide an opportunity to rethink the recent overly optimistic trade policy expectations," notes Helaba's research team, which was already relatively cautious. The stock markets have "simply run out of steam."
Thorsten Weinelt of Commerzbank also expects a breather after the significant gains in April and May. "Geopolitical risks in the Middle East and slow progress in negotiations on US import tariffs are likely to slow down the now fairly highly valued stock markets for the time being."
The DAX lacks "inner strength"
Berndt Fernow of LBBW fears that the military conflict between Israel and Iran could last longer this time because the protective powers of the US and Russia and China will limit themselves to warnings. "For the stock markets, this development could trigger the consolidation we have been expecting for some time." He sees the lack of inner strength as the main problem for the DAX. By this, the analyst means that prices have hardly moved during actual trading hours recently. This means that the effective willingness to buy shares at the current price level has declined significantly. "The buyers are losing ground to the sellers." In addition, market breadth continues to leave something to be desired. "In the DAX, only 13 stocks have outperformed the index this year, while 27 have underperformed."
The DAX from a technical analysis perspective
Despite the recent price setbacks, the upward trends remain intact according to chart analysis. "Nothing has happened yet on the DAX," explains Marcel Müller from Müller Briefe. In his view, the interim high of 23,476 points in March plays a decisive role. The technical analyst describes this mark as "major support." He does not see the next potential support level until 22,861 points. However, risk-taking investors may already be lying in wait there. This is because "the classic scenario suggests that a new attempt to reach the top will start from there." For a "secure long setup," however, the DAX would have to find its way back above the pullback to the flattened upward trend at 23,800-23,930. "Only then will a relief rally provide a reliable signal that the DAX will return to the top."
The week of central banks
In addition to geopolitical risks, investors will be keeping an eye on several central bank meetings in the coming week. Interest rate decisions are due in a total of six major industrialized countries in the coming days. In addition to the US Fed, the Bank of Japan, the Bank of England, the Swiss National Bank, and the Norwegian and Swedish central banks will also be meeting.
Important economic and business events of the week
Monday, June 16
Canada: Second day of the G7 summit (Sunday to Tuesday) in Alberta
Tuesday, June 17
Japan: BoJ interest rate decision. Deutsche Bank expects the target range for the short-term key interest rate to remain unchanged. The chief economist for Japan sees no significant changes in the economic and inflation outlook and expects the Bank of Japan to continue to point to the high level of uncertainty due to tariff policy. Commerzbank analysts expect the central bank to review its bond purchases.
11:00 a.m. Germany: ZEW Index. Following the positive Sentix data last week, Deka also expects an improvement in the ZEW economic situation and expectations for Germany. According to economists, hopes for an easing of trade disputes and fiscal support are fueling economic optimism. The consensus estimate is 34 points, up from 25.2 points in May.
2:30 p.m.: USA: Retail sales. Commerzbank strategists assume that advance effects due to tariffs in March and April have supported sales. As this effect is unlikely to have played a role in May, they expect retail sales to decline by 0.7 percent this time around.
Wednesday, June 18
8:00 p.m. USA: Fed interest rate decision. Economists agree that the US Federal Reserve will leave its key interest rate unchanged, even though US President Donald Trump is vehemently calling for an interest rate cut. Deka also sees little need for change in the Fed's statement. However, the projections are likely to be adjusted. A downward revision of the growth outlook and an upward revision of the inflation outlook for this year are expected.
Thursday, June 19
Regular stock market trading in Frankfurt and on Xetra.
Interest rate decisions by several central banks (including the UK and Switzerland)
Stock market holiday in the US (all markets closed)
Friday, June 20
Around 1 p.m.: Major expiry date on the world's major futures markets.
By Thomas Koch, June 16, 2025, © Deutsche Borse AG
(Deutsche Borse AG is solely responsible for the content of this column. The articles do not constitute an invitation to buy or sell securities or other financial assets.)
