Stock exchanges in the red with Iran and the ECB, gas and oil flare-up. In Milan (-2.3%) Inwit thud

(Il Sole 24 Ore Radiocor) - The new escalation in the Middle East targeting energy assets in the region and the risks of a lingering global energy supply crisis gave wings to oil and gas and sank the European stock markets, which closed sharply lower, and pushed Wall Street down as well. Meanwhile, the ECB, as expected, left the cost of money unchanged with deposit rates at 2% and warned of the fallout from the Middle East tensions,  raising inflation estimates, as the Federal Reserve did on the eve of the meeting, and lowered EU GDP estimates due to the uncertainty caused by the conflict in Iran. Similar decision by the Bank of England which, as expected, left rates unchanged at 3.75%.

Against this backdrop, European stock exchanges closed sharply lower with the FTSE MIB down more than two points, as did the CAC 40 of Paris, the DAX 40 of Frankfurt, the AEX of Amsterdam, the IBEX 35 of Madrid and the FT-SE 100 of London.

Returning to energy, after Israel's attack on Iran's South Pars gas field, the largest in the world, Tehran reacted with two attacks on a major gas hub in Qatar, across the Gulf, and a barrage of missiles fired at the Saudi capital, Riyadh, whose debris landed near a refinery. In response, Donald Trump threatened to strike Iran's gas fields. If Tehran does not cease its attacks against Qatar.

The ECB Governing Council, at the end of its monetary policy meeting in Frankfurt, decided to leave the cost of money unchanged, as widely expected by the markets. The interest rates on deposits with the central bank, on main refinancing operations and on marginal refinancing operations will therefore remain unchanged at 2.00%, 2.15% and 2.40% respectively. "The war in the Middle East," reads the end-of-summit communiqué, "has made the prospects significantly more uncertain, generating upside risks to inflation and downside risks to economic growth.
The conflict will have a major impact on inflation in the short term through increases in energy commodity prices. The medium-term implications will depend on the intensity and duration of the war as well as on how energy prices will affect consumer prices and the economy'. The Governing Council," the statement continued, "is well placed to address this uncertainty. Inflation has been around the 2% target, longer-term inflation expectations are firmly anchored and the economy has shown good resilience in recent quarters". The Eurotower lowered its 2026 GDP estimates to 0.9% (from 1.2%) and 1.3% (from 1.4%) for 2027. In contrast, it raised its inflation estimates to 2.6 % in 2026, 2.0 % in 2027 and 2.1 % in 2028.

"The risks to the growth outlook are tilted to the downside, especially in the short term". This was said by ECB President Christine Lagarde at a press conference in Frankfurt. "The war in the Middle East represents a downside risk for the euro area economy, adding to the global environment characterised by volatile policies. A prolonged war could further increase energy prices and for a longer period than currently expected, and also affect confidence. These factors would erode incomes and make businesses and households more reluctant to invest and spend'. Moreover," he added, "a deterioration in global financial market sentiment could further dampen demand.