A brief surge in global markets, sparked by President Trump’s announcement of a five-day pause in hostilities with Iran, proved fleeting today as Tehran denied any talks with American counterparts and continued its strikes on targets in the Gulf. The immediate impact of Trump’s halt saw U.S. and European stocks reverse earlier losses to close in positive territory, with crude oil prices plunging almost 10%.
However, today’s sentiment quickly soured. Oil resumed its upward trajectory, with Brent crude climbing 3.65% to $91.4 a barrel, as the ongoing conflict reignited supply concerns. European stocks traded mostly flat, while Asian markets, which did not fully reflect Trump’s yesterday’s announcement, posted gains between 1.5% and 2.5%. U.S. equity futures pointed to modest losses at the open.
The military and economic turmoil casts a long shadow over Europe. The Eurozone composite PMI fell from 51.9 to 50.5 in February, reaching a 10-month low, as the Iran war brings renewed risks of stagflation. In a stark sign of supply chain stress, Slovenia became the first country in Europe to implement fuel rationing.
Adding to the complexity, the U.S. is now threatening Europe with cuts to its supply if the bilateral trade deal is not ratified by the European Parliament by Thursday, March 26th. This pressure comes despite the European Union having just signed a comprehensive free trade agreement with Australia, signaling a push for new alliances amidst the trade disputes.
Despite the broader economic headwinds, European car sales saw a 1.7% increase in February, largely buoyed by strong demand for electric vehicles.
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