The renewed US-Iran conflict has dampened momentum in Europe
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After a hot fall, a spring tornado could wreak havoc in France
Barely half a year after this year’s French budget was passed, the wrangling over the 2027 budget is about to begin, but that’s not all, because France will also hold a presidential election next spring. During the first public presidential debate, some of the radical candidates put forward ideas that were, at times, unconventional. Although the presidential election in late April still seems far off, based on the latest polls, if no candidate secures enough votes and a runoff is held, it cannot be ruled out that two radical presidential candidates will face off against each other. Market participants may have begun to price in this growing uncertainty, as the yield spread between French and German 10-year government bonds has started to widen again in recent weeks. The period ahead promises to be full of twists and turns, so it will be worth keeping a close eye on developments in French domestic politics.
Commodities - Technical Analysis
Gold and silver prices have retested their uptrend lines, so the long-term trend may continue. Oil prices have broken out of a contracting pattern, which may signal the start of another upward wave. Natural gas prices have also begun to rise, signaling a buy. In the case of copper, the main uptrend remains in effect, and there are currently no signs indicating a change in the trend’s structure. Following significant gains, wheat and corn have become heavily overbought, increasing the likelihood of a correction.
Attacks between the U.S. and Iran resumed this week, causing traffic in the Strait of Hormuz to grind to a halt once again, which sent prices for goods passing through the strait on an upward trajectory. Brent crude jumped 17% this week, while the European TTF natural gas price surged nearly 30%, triggering a correction in European stock markets as well. All of this halted the momentum of the industrial sector, which had reached a new high just last week, causing our trading idea to hit its tight stop-loss level.
Although we had indicated even after the signing of the U.S.-Iran memorandum of understanding that this temporary ceasefire period appeared fragile, we did not expect the situation to tip back toward escalation within a month. The U.S. has been attacking Iran for six days now, and Iran has responded with strikes of its own in the region, preventing traffic through the Strait of Hormuz from picking up further. The U.S. is threatening to attack Iran’s energy infrastructure, to which Iran is responding by threatening strikes against Red Sea shipping by Yemeni Houthi rebels.
As a result, energy prices have begun to rise again in recent days, and if the fighting continues, this trend could persist in the coming period. This, in turn, could negatively impact European stock markets—and within them, the industrial sector, which is more sensitive to energy prices—so we are closing out our trading idea, which has since stalled at a loss of around 5%.
From a technical perspective, the breakout attempt that began two weeks ago ran out of steam; the price fell below the 118.75 level and, within a few days, left a downward gap. Ideally, the market should have filled this gap within two to three days, but this did not happen, suggesting the likelihood of further weakness.
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