OTP Morning Brief: The Middle East conflict continued to escalate, deteriorating investor sentiment
Related content
OTP Morning Brief: Stock markets fell on Tuesday
According to Trump, the Iran ceasefire has been put on life support, making investors skeptical about the swift success of peace negotiations. This triggered a broad-based fall across Western Europe, the CEE region, and overseas markets alike. U.S. sentiment was further weakened by higher-than-expected CPI, which also contributed to a rise in bond yields.The forint weakened back to the 357 level. Asian markets rose. Today, attention will be on the eurozone GDP release.
OTP Morning Brief: Oil prices continued to rise as talks between the US and Iran stalled
On Monday, crude oil prices rose by nearly 3%, while European benchmark natural gas prices gained 5%, after President Donald Trump rejected Iran’s response to the US peace proposal, pushing the talks into a stalemate. The Strait of Hormuz remains closed. Concerns over a prolonged conflict, combined with rising oil prices, are further reinforcing CPI-related fears. Nevertheless, major European and overseas equity indices closed slightly higher on Monday. The S&P 500 and the Nasdaq reached fresh all-time highs, with the AI-driven rise partially offsetting geopolitical uncertainty. In parallel with the rise in oil prices, bond market yields also rose. EUR/USD closed at 1.178. Hungarian long-term yields also rose slightly, while the forint weakened by 0.5%. In today’s trading, the Japanese 10-year yield rose to 2.54%—a level not seen since 1997—following the release of a hawkish summary from the BoJ’s latest meeting. Today, attention will be on Germany’s ZEW economic sentiment index, while in the US the focus will be on CPI data.
Risk aversion intensified across global markets after the conflict in the Middle East escalated again, oil prices surged, and Donald Trump once more threatened tariff hikes against European automakers, triggering broad-based declines in European equities. At the same time, the Sentix sentiment index came in stronger than expected in May. US equity markets were also under pressure, bond yields edged higher, the dollar strengthened, and regional currencies weakened (with EUR/HUF moving above 365). Asian markets also declined.
Today, attention will be focused on US economic data.
European markets declined amid Middle East uncertainties, while European automakers once again came under pressure due to Trump’s tariffs
European equities fell again on Monday as fighting in the Middle East intensified once more, pushing oil prices sharply higher, while investors assessed the prospect of consecutive ECB rate hikes this year. Among the major indices, the CAC 40 declined 1.7%, the DAX fell 1.6%, while the FTSE slipped just 0.1%. As a result, the pan-European STOXX 600 index closed 1.0% lower, with most sectors ending in negative territory. Euro-area bank stocks suffered particularly heavy losses, dropping 2.7%, marking their largest one-day decline in more than six weeks. Automaker shares weakened 2.1% after US President Donald Trump announced late on Friday that tariffs on cars and trucks imported from the European Union would be raised to 25% this week from the previously agreed 15%, citing the EU’s alleged failure to meet its commitments. The EU has rejected the US accusations, while a majority of member states—particularly Germany—are urging the bloc to swiftly finalize and implement its own legislative measures, namely cutting US industrial import tariffs, in order to avoid further punitive actions. On the back of the news, shares of major manufacturers were sold off, including Mercedes (-3.4%), Volkswagen (-2.8%), and BMW (-2.4%). Among individual stocks, Thyssenkrupp fell 1.8% after the German industrial group suspended talks on the sale of its steel business to India’s Jindal Steel.
The Sentix euro-area investor sentiment index improved more than expected in May (-16.4 points versus -21.0 expected, after -19.2 in April), suggesting that markets are pricing in fewer adverse effects from the Iranian conflict. At the same time, Germany remained particularly weak (-30.9 points after -27.7 in April), and although both the euro area expectations and current conditions indices rose, they remain in negative territory, indicating that recession risks persist.
CEE equity indices painted a mixed picture: the PX 50 plunged 2.6%, the BUX posted a more modest 0.2% decline, while the WIG 20 edged slightly higher. Among Hungarian blue chips, Richter’s 2.7% drop and Mol’s 0.9% gain stood out, the latter supported by higher oil prices. According to data from the Hungarian Central Statistical Office (KSH), industrial producer prices in March 2026 were 1.2% higher on average than a year earlier and 3.9% higher than in the previous month.
The Middle East conflict escalated once again after Trump launched his “Project Freedom” military operation, leading to declines in US stock markets
The balance in the Middle East war tilted once again toward escalation after Donald Trump announced a naval operation dubbed “Project Freedom” on Monday, aimed at reopening the Strait of Hormuz. The operation, however, failed to deliver an immediate improvement in maritime traffic and instead triggered Iranian military retaliation: several commercial vessels were hit by drone and missile strikes, an oil terminal caught fire in the United Arab Emirates, and Iran expanded its maritime control zone, according to a statement by the Islamic Revolutionary Guard Corps. At the same time, Washington reported the destruction of six Iranian fast attack boats and the successful passage of two cargo ships, claims that were denied by Iran.
Rising tensions pushed major indices lower, with the Nasdaq down 0.2%, the S&P falling 0.4%, and the Dow declining 1.1%, meaning both the Nasdaq and the S&P retreated from their record highs set on Friday. Ten of the S&P 500’s eleven sector indices closed lower, led by the materials sector with a 1.6% decline, followed by a 1.2% drop in industrials. In contrast, the energy sector rose 0.9%. Shares of GameStop fell 10%, while eBay climbed roughly 5% after the video game retailer proposed acquiring the online marketplace for around USD 56 billion in a cash-and-stock deal. FedEx shares dropped 9.1%, and United Parcel Service fell 10.5%, after Amazon announced the launch of “Amazon Supply Chain Services,” opening up its logistics network to other companies. Palantir shares rose 1.4% ahead of the release of its quarterly earnings report after the market close.
Brent crude oil futures surged 5% on Monday to USD 114 per barrel, the highest level since mid-2022, as tensions in the Middle East escalated sharply. Meanwhile, WTI prices rose 4.4% to above USD 106 per barrel.
Global risk aversion pushed bond yields higher and weighed on regional currencies
Bond yields edged higher again, with 10-year yields rising by around 5 basis points in both the US and Europe. The US 10-year yield approached 4.45%, while the German 10-year moved close to 3.1%. The dollar strengthened by a quarter of a percent against the euro, with EURUSD slipping below 1.17.
Heightened risk aversion driven by rising oil prices weighed on regional currencies: the Czech koruna weakened by 0.1%, the zloty by 0.3%, and the forint by 0.6% against the euro, with EUR/HUF moving above the 365 level. In the domestic government bond market, reference yields—set in the early afternoon—declined compared to Thursday’s levels by 1–2 basis points in the segment up to three years and by around 5 basis points at longer maturities, reflecting further yield declines on Thursday followed by a modest rebound yesterday. The 10-year yield fell below 6%. Demand was strong at the DKJ switch auction, where the Government Debt Management Agency (ÁKK) accepted more than HUF 50 billion out of bids totaling close to HUF 70 billion.
Today's highlights
Asian equities declined on Tuesday as oil prices eased, although they remained above USD 100 per barrel. Investors also paid close attention to the yen after the Japanese currency briefly surged in the previous session, fueling renewed speculation about fresh FX market intervention by Tokyo. The MSCI’s broadest index of Asia-Pacific equities excluding Japan fell 0.3%.
Today, attention will be focused on data coming out of the US, including the ISM non-manufacturing PMI, new home sales, and March labor market data. In addition, companies such as AMD, HSBC, and Pfizer are scheduled to report earnings.
Today, the Government Debt Management Agency (ÁKK) is offering HUF 30 billion worth of three-month Treasury bills (DKJ).
Get more out of your investments!
Global Markets Services
OTP Global Markets offers a broad range of services in the field of local and international money and capital markets.
Read morePrivate Banking Services
Personal care and expertise with OTP Private Banking, along with the knowledge, security, and innovations of a multinational banking group.
Read more