- The geopolitical conflict between the US and Iran in the Strait of Hormuz has escalated again. The US revocation of Iran's oil sanctions waiver has triggered expectations of tightening supply for crude oil and European natural gas, leading to a comprehensive rise in international commodity prices.
- The surge in geopolitical risk premiums has led to a deterioration in global risk appetite, with major European stock indices collectively under pressure and declining. The UK's FTSE 100, Germany's DAX, and France's CAC 40 indices all showed significant declines.
- The gold market is showing a divergence between futures and spot prices. Short-term pricing is disturbed by interest rate expectations ahead of the Federal Reserve meeting minutes, but the continuous increase in holdings by the People's Bank of China provides underlying structural support for gold prices.
Deteriorating Geopolitical Situation Hits European Equity Markets
The sudden tension in the Middle East geopolitical situation has rapidly heightened global risk aversion, leading to an outflow from equity assets. The UK's FTSE 100 index fell by 0.61%, while Germany's DAX index and France's CAC 40 index dropped by 1.10% and 0.82%, respectively. Market risk appetite has noticeably contracted, with investors reassessing the potential risks for multinational companies in terms of supply chain and energy costs. In the foreign exchange market, the British pound slightly strengthened against the US dollar to 1.3358, indicating the cross-impact of geopolitical turmoil on non-US currencies is beginning to manifest.
Supply Tightening Expectations Drive Energy Prices Soaring
With the US canceling the sanctions waiver for Iranian oil sales, Brent crude and WTI crude rose by 2.9% and 2.5%, respectively. ING Group pointed out that the front end of the crude oil forward curve has returned to a backwardation structure, reflecting extreme market concerns about short-term supply disruptions. Meanwhile, Ukraine's continued drone attacks on Russian refineries have exacerbated diesel supply tensions, pushing the European TTF benchmark natural gas price up by more than 4%, surpassing 48 euros per megawatt-hour, accelerating the revaluation of the energy sector.
Central Bank Gold Demand and Federal Reserve Policy Game
The gold market is experiencing a divergence between futures and spot prices, with futures prices falling by 0.71% to $4,127.41 per ounce, while spot gold rose by 0.28% to $4,117.09 per ounce. In the short term, gold prices are suppressed by the upcoming Federal Reserve FOMC meeting minutes, with the market adjusting positions based on policy expectations. However, the People's Bank of China's continuous gold purchases for the 20th consecutive month provide strong structural support for gold prices, alleviating some of the pressure from macro liquidity tightening.
Divergence Among UK Companies and Stock Revaluation
Amidst a turbulent macro environment, UK domestic companies are showing varied performances due to their fundamentals and regulatory factors. Builder Vistry faces revaluation pressure as it expects a pre-tax loss of £30 million in the first half and the departure of its CFO. Virgin Media was fined £28 million for obstructing users from canceling contracts. In contrast, Unite Group and Jet2 have benefited from a recovery in domestic demand, maintaining relatively stable performance expectations. This indicates that under the pressure of the overall index, there is a deep divergence in capital flows among sectors and individual stocks.
