The renewed US-Iran conflict has dampened momentum in Europe
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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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