Stock markets: renewed US-Iran tensions send markets into a tailspin. Milan holds its ground on the back of a surge in crude oil prices

(Il Sole 24 Ore Radiocor) - A turbulent trading session for European stock markets, which, in the final session of August, are once again grappling with tensions in the Middle East. The resurgence of the conflict between Washington and Tehran comes after a month described by analysts as ‘low-intensity’, given that the confrontation in August had shifted to the economic sphere, whilst now the tone appears to be turning the clock back to the most critical phase (including for oil tankers in the Strait of Hormuz). Fears of a military escalation are, in fact, compounded by concerns over inflation, due to crude oil prices surging above $90, with the risk of an accelerated rise in interest rates by the Federal Reserve and the ECB (amplified by Fed Chairman Kevin Warsh, who had already adopted a ‘hawkish’ stance at Jackson Hole). Meanwhile, pressure on the economic front from sanctions also continues. Ahead of the G20 Finance Ministers’ meeting (31 August–1 September), US Treasury Secretary Scott Bessent stated that he would not rule out possible sanctions against China as well, due to its trade relations with Tehran. Against this backdrop, the Milan Stock Exchange closed flat (-0.01 per cent), confirming its August performance at +0.9 per cent. It was a month in which the main European indices closed with mixed results (Frankfurt leading the way, Paris bringing up the rear) following weeks of grappling with pressure on government bond yields, geopolitical crises and ongoing doubts about the resilience of the tech sector.

Stock markets fell on Wall Street following the first air strikes carried out in a month by the United States and Iran as part of their conflict. On Sunday, US Central Command confirmed an attack on two rocket launchers on the Iranian island of Larak. Iranian state media subsequently reported retaliatory strikes by Tehran against US bases in Jordan. Oil prices surged following the resumption of hostilities. Rising tensions in the Middle East have contributed to volatility in August’s trading, but Wall Street is currently on track for a month of substantial gains, driven by the technology sector.

On the Milan Stock Exchange, following the rise in crude oil prices, the major oil companies Tenaris (+3 per cent), Saipem (+2.3 per cent) and Eni (+2.3 per cent) led the gains, with Eni also buoyed by the imminent agreements in Venezuela regarding future energy projects. In the banking sector, MPS was the top performer (+1.5%), whilst the defence and aerospace sectors brought up the rear, with Avio (-2.9%) and Leonardo (-2.2%). Outside the main index, Banca Ifis slipped (-5.6%).

In the currency markets, theeuro/dollar is trading flat just below the 1.16 mark (1.1583). The price of oil is rising again following renewed clashes between the United States and Iran. US forces have carried out strikes on the Iranian island of Larak (in the Strait of Hormuz) – the first in a month – prompting retaliation by Tehran against US targets in Jordan. Consequently, the November futures contract on Brent futures have risen above $90 a barrel, whilst WTI is heading towards $86. natural gas is also surging, up by more than 5 points to over 70 euros per megawatt-hour.

The spread between BTp and Bund closed slightly higher. At the close of trading, the yield spread between the benchmark 10-year BTp and the German Bund of the same maturity stood at 83 points, up 1 basis point from Friday’s close. The yield on the benchmark 10-year BTp rose more sharply, closing at 4.15 per cent, up from 4.09 per cent at the close the previous day.