Stocks Climb in Return Calm as Oil Prices Decline – Europe Market Wrap

Monday saw a calming of world markets as traders projected that diplomatic efforts would help keep the tension between Israel and Iran from getting worse.

Following Friday’s 1.5% selloff in the S&P 500, European stocks edged higher while US shares suggested a Wall Street comeback. Treasury bonds declined in tandem with the dollar. WTI oil fell below $85 per barrel. Gold reached an ounce of $2,350.

The danger of a strike and counter-strike cycle in the Middle East has frightened markets, potentially driving energy prices higher at a time when policymakers are still fighting to bring inflation under control. However, dealers reported that the issue seemed to be under control for the time being.

The tensions fuelled increases in Goldman Sachs’ defence share index. Dassault Aviation and Saab both gained more than 2%. Shares of Leonardo, Thales, BAE Systems, and Rheinmetall all rose by at least 1%.

ECB’s Simkus: Geopolitical shocks such as an escalation in the Israel and Iran conflict could cancel the June rate cut.

ECB’s Simkus: I see a chance of a July rate cut following the move in June.