Stock markets: the deadlock in Iran continues to weigh on sentiment. Brent crude above $90 drives up oil prices

(Il Sole 24 Ore Radiocor) - The deadlock in the Iran negotiations is weighing on European stock markets. Consequently, partly due to the surge in oil prices with Brent crude above the $90 per barrel mark, European stock markets are trading lower: in Milan, the FTSE MIB is down, whilst across Europe the CAC 40 and the DAX 40. Futures are also weak on Wall Street, where the tech sector appears to be the main influencing factor, with the sector also down in Europe. Meanwhile, President Donald Trump has stated that he is not interested in extending the agreement with Tehran, adding that he is ‘ready to bomb Oman’, which for several weeks has been trying to agree with Iran on a safe route for transit through the Strait of Hormuz.

For its part, Tehran – as reported by the WSJ – is said to have decided to abandon its defensive stance by stepping up the production of missiles and drones. And through its chief negotiator, Mohammad Bagher Ghalibaf, Iran has reiterated that the Strait of Hormuz will remain closed until the United States complies with the terms of the interim agreement, namely the lifting of the naval blockade and oil sanctions, the release of frozen Iranian assets, and an end to threats and military operations on all fronts. Meanwhile, tensions continue in the Red Sea, where the pro-Iranian Houthi militia has claimed responsibility for attacks on a Saudi refinery.

The the yield on 30-year US Treasury bonds has risen to its highest level in nearly 20 years (5.31 per cent the previous day, the highest close since 5.356 per cent on 12 June 2007). In Europe, the yield on the 30-year German Bund is at its highest since 2011, whilst French yields with the same maturity are at their highest since 2008. In the UK, Gilt yields are, however, just shy of the post-1998 high reached in the first few weeks of the war with Iran. In Japan, too, 30-year yields have approached their all-time high. According to Shriya Samarth of StoneX, this indicates that ‘inflation, one way or another, is set to persist because of oil. And we simply have to learn to manage it’.

On the stock market, Nexi is up sharply Nexi is awaiting confirmation on possible move by Stripe regarding PayPal. Oil companies are benefiting from the latest surge in crude oil prices, in particular Saipem and Eni. At the bottom of the list, profits were realised in the tech sector following the previous day’s trading, with Stmicroelectronics and Prysmian with anticipation for tomorrow’s IPO of the Chinese firm Unitree offset by the usual concerns regarding spending on artificial intelligence and the risk of a ‘bubble’, highlighted yesterday in an ECB report. The focus is also on the banking sector, with the CEO of Banca Monte Paschi Siena Luigi Lovaglio who, according to the *Corriere della Sera*, has not abandoned the idea of opposing the bid by Intesa Sanpaolo, despite the U-turn by Banco Bpm on a possible merger. All eyes are also on Unicredit , with the German government potentially considering the sale of a stake in Commerzbank, should they manage to agree on a joint strategy.

With tensions in the Middle East flaring up again, October Brent crude is currently trading at around $91 a barrel, whilst WTI is around $85. TTF gas in Amsterdam is also on the rise, at €62 per MWh. Spot gold is down slightly at around $4,400 an ounce. Turning to the currency markets, the scaling back of expectations of a rate rise by the Fed is still weighing on the dollar, which fell yesterday to a three-month low. The greenback is trading at around 1.157 to the euro (down from 1.1585 at yesterday’s close) and is worth 159.6 yen (up from 159.3), whilst the euro/yen exchange rate stands at 184.8 (up from 184.6). The yield spread between the benchmark 10-year BTP and its German counterpart stands at 80 basis points, up from 79 points at yesterday’s close. The yield of the benchmark 10-year BTp, rising to 4.05 per cent from 4.01 per cent in the previous session..