European Stock Markets Rise Amid Oil Price Decline and Optimism over Middle East De-escalation
European stock markets experienced strong gains on Wednesday, driven by expectations of a de-escalation in Middle Eastern conflicts and a significant drop in oil prices. Concerns over inflationary contagion had previously weighed on markets during recent days. Supportive comments from US President Donald Trump, stating that the war in Iran is almost over, further boosted investor confidence.
The IBEX 35 opened with a 2 percent rise, led by companies such as ArcelorMittal plus 5.5 percent, Santander plus 4.4 percent, Acciona plus 4.3 percent and IAG plus 3.8 percent, which had suffered from oil price increases. Major European indices also posted gains: Milan rose, Frankfurt increased by 2 percent, London advanced by 1.4 percent, and Paris gained 1 percent.
Oil prices experienced a sharp decline after briefly hitting 120 dollars per barrel amid fears of a prolonged conflict. Following Trumps remarks, prices reversed course and closed lower, with Brent crude falling 6 percent to around 93 dollars, while US WTI also declined to approximately 90 dollars. The gas market also dropped sharply, down 13 percent, falling below 50 euros per megawatt hour. Market analysts suggest that the fall in oil prices may help to reduce inflation expectations.
Despite recent optimism, tensions in the region remain. Trump has warned that US attacks could escalate if Iran attempts to block the Strait of Hormuz, through which about a fifth of global crude oil supplies pass. Iran has declared its intention to block the Strait until further notice. Saudi Aramco cautioned that a prolonged closure would have catastrophic consequences. Nonetheless, market fears appear to have abated somewhat, given the decline in oil prices.
Analysts from Ibercaja Gestion believe the current situation is unsustainable in the long term. They argue that while regional economies might sustain a closure of the Strait of Hormuz for weeks, it cannot be a lasting solution. Asian markets rebounded from previous declines, with Seoul up 5 percent, Tokyo up 3 percent, and Hong Kong up 2.2 percent, reflecting the impact of oil and gas price fluctuations.
The US dollar, which initially benefitted as a safe haven, weakened slightly against the euro to around 1.165 dollars per euro. This decline supports an increase in gold prices, which rose about 0.5 percent, reaching approximately 5160 dollars per ounce, amid ongoing geopolitical uncertainties.