Germany’s leading index, the DAX, is reacting cautiously to the latest escalation in the Middle East. Following new US airstrikes on Iranian targets and tightened sanctions, the DAX was trading around two percent lower early Wednesday morning. The oil price temporarily rose by four percent, adding further pressure on markets.
The US launched a new wave of airstrikes after attacks on tankers in the Strait of Hormuz. In addition, the US reinstated sanctions on Iranian oil. Tehran immediately condemned Washington’s actions as a “serious violation” of the framework agreement to end the war and announced, among other things, missile attacks on the Gulf state of Bahrain. Crude oil prices rose in response, and the DAX declined.
The rise in the oil price of up to four percent is the clearest market reaction to the geopolitical tensions. Higher energy costs burden industry and could further fuel inflation. Market observers expect continued volatility as long as the situation in the Middle East remains tense.
Source: www.handelsblatt.com
