The DAX opened the trading day on Tuesday with a clear boost. By about 9:30 a.m. it was priced at roughly 23,960 points, 2.4 % above yesterday’s closing level. Infineon topped the gains list, followed by Siemens Energy and Continental, while FMC, Gea and Deutsche Börse were at the bottom.
Energy prices were a headline theme again. After U.S. President Donald Trump hinted that conflict in the Middle East could end soon, oil fell sharply. Brent crude was trading at $90.25 per barrel at 9 a.m. German time – down $8.71, or 8.8 %, from the previous close. Gas prices dropped just before the market opened, falling nearly 17 %. European wholesale gas prices for April delivery were bid as high as €47 per megawatt hour, implying a consumer price of about 10-12 cents per kilowatt hour after taxes and fees, compared with a peak of nearly €68 the day before.
Consorsbank market analyst Jochen Stanzl said, “Oil prices fell almost as fast yesterday as they had risen, driven by expectations of a swift end to the war”. He noted that Trump’s remarks that the conflict would “soon end” fueled optimism that the U.S. would push for a quick resolution, prompting traders to bet on a TACO (“Trump Always Keeps the pressure on”) strategy: politicians keep pressure until markets avoid severe negative shocks. According to Stanzl, the oil price jump to almost $120 a barrel yesterday appeared to confirm this theory.
The risk to markets, however, remains. “Trump may declare the war effectively over” Stanzl added, “but the question is whether Iran agrees. The key proof will be whether the Strait of Hormuz is safe for dozens of tankers carrying oil and gas to the world”. With the current oil price behaving like a proverbial tail wagging the dog, equity markets react strongly to any price movement. Each successful passage of a tanker through the Strait should reduce the risk premium on oil. Investors are now waiting for concrete evidence supporting Trump’s comments; if they fail to materialise, nervousness could swiftly resurface.
