Dax under pressure from Middle East conflict and ECB interest rate decision

On the day of the ECB's interest rate decision, investors are primarily looking to Berlin. Meanwhile, the tense situation in the Middle East is driving the price of oil further up.

Frankfurt. The German stock market is under pressure this week. The tense geopolitical situation in the Middle East and the consequences on the energy markets are unsettling investors.

On Thursday, the Dax will find some support ahead of the interest rate decision by the European Central Bank (ECB). The German leading index is hardly changed at 25,555 points. The day before it lost 1.7 percent and closed at 25,569 points, its lowest level since July.

The situation in the Iran war is becoming increasingly tense again, especially after the US military sank five Iranian oil tankers on the night of Tuesday to Wednesday. Overall, attacks in the Strait of Hormuz continue to increase. The global economy is suffering as a result, as a large proportion of cargo shipping has to pass through the strait.

The price of oil is particularly strongly influenced. A barrel (159 liters) of North Sea Brent crude oil for delivery in November rose to 101.94 US dollars on Thursday morning, the highest level since May 20th.

In the morning, oil prices fell slightly again. Brent oil lost 0.7 percent, but is still above the $100 mark. The price of US WTI oil is 0.4 percent lower at $95.63 per barrel for delivery in October.

After the outbreak of war in February, the price of oil was at times just under $120. In July, hopes of an early peace caused the price of oil to fall back to its pre-war level of $70.

“With Brent rising above $100, markets are pricing in the increasing risk that the conflict between the US and Iran could become deeper and more protracted,” writes Kyle Rodda, senior financial market analyst at capital.com.

Investors look to the ECB interest rate decision

The most important date of the day is the ECB's interest rate decision. On the financial markets it is a foregone conclusion that the ECB's monetary authorities will raise the key interest rate by a quarter of a percentage point to 2.50 percent in the afternoon in order to combat inflation.

At 3.3 percent in August, this was well above the ECB target of two percent. Particular attention is paid to the statements made by ECB boss Christine Lagarde on the further course of monetary policy.

Inflation as high as it was last in 2023

The final inflation figures for Germany were announced in August even before trading began. The Iran war is driving up energy prices and making life more expensive. In August, consumer prices were 2.9 percent higher than in the same month last year, as the Federal Statistical Office confirmed. The last time there was a stronger increase in Europe's largest economy was in December 2023, when it was 3.7 percent.

Economists also expect increased inflation rates in the next few months. The Ifo Institute expects inflation to be 2.8 percent in Germany for 2026 as a whole, and the rate could rise to 3.0 percent in 2027.

Meanwhile, the visit of the President of the United Arab Emirates, Sheikh Mohammed bin Zayed Al Nahyan, to Berlin could provide positive impulses for the German economy. Agreements in the areas of investments, AI and energy worth several billion dollars are to be signed.

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