Stock markets: renewed US-Iran tensions send markets into turmoil. Milan holds its ground as crude oil prices surge

(Il Sole 24 Ore Radiocor) - A turbulent 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 a more 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. US Treasury Secretary Scott Bessent, ahead of the G20 Finance Ministers’ meeting (31 August–1 September), 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) after weeks of grappling with pressure on government bond yields, geopolitical crises and ongoing doubts about the resilience of the tech sector.

Wall Street closes lower. The Dow Jones falls by 0.70 per cent to 53,186.32 points, the Nasdaq drops by 0.12 per cent to 26,370.89 points, whilst the S&P 500 fell by 0.33 per cent to 7,686.38 points. 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 contributed to the volatility seen 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) are leading the gains, with Eni also buoyed by the imminent agreements in Venezuela on future energy projects. In the banking sector, MPS was the best 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 foreign exchange market, theeuro/dollar is trading largely unchanged 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 basis points, up 1 basis point from Friday’s close. The rise was more pronounced for the yield on the benchmark 10-year BTp, which closed at 4.15 per cent, up from 4.09 per cent at the close the previous day.