Investing.com – European stocks oscillated around the flatline on Tuesday despite an ongoing historic run-up in oil prices, aided by a media report that U.S. President Donald Trump is willing to bring an end to the war in Iran even if the Strait of Hormuz remains largely shuttered.
By 03:10 ET (07:10 GMT), the pan-European had gained 0.1%, the in Germany had risen by 0.2%, the in the U.K. had inched up by 0.1%, and the in France was mostly unchanged.
The Wall Street Journal reported that Trump would be open to concluding the more than month-old military campaign despite Iran holding firm control over the Strait of Hormuz, a vital waterway through which a fifth of the world’s oil traverses. Its effective closure for weeks has fueled a sharp spike in global oil prices and worries over a possible recession in countries around the world.
Brent crude futures, the global oil benchmark, were last hovering above $110 a barrel. Before the start of the war, Brent was hovering around $70 a barrel.
Trump and his aides have assessed that a mission to unblock the strait would push the timeline for the assault beyond his four to six-week timeline, the WSJ reported. The president instead decided that the U.S. should hit Iran’s navy and missile stocks hard and pursue a draw down in hostilities while pressuring Tehran through diplomacy, the report noted, citing administration officials who added that Washington would lean on allies in Europe and the Persian Gulf to take the lead on the strait should those efforts fail.
More clarity around the impact of the fighting in the Middle East, which has escalated from a joint U.S.-Israeli assault on Iran to include an array of nations in the region, may come later in the day with the release of Eurozone inflation data for March. Europe is heavily reliant on natural gas imports from the Gufl, especially Qatar, where production facilities have been targeted by Iranian air strikes.
Officials at the European Central Bank have suggested that interest rate hikes could be on the table should the surge in energy costs reignite seemingly dormant inflationary pressures in the Eurozone currency area. Indeed, ECB President Christine Lagarde has said policymakers may need to act even if price increases prove not to be too persistent.
Economists expect headline consumer prices to rise by 2.6% this month, compared to 1.9% in February. The ECB has set a medium-term inflation target of 2.0%.
Expectations for a potential ECB rate bump have sparked an uptick in government bond yields in Europe, although they were little changed ahead of the consumer price index data on Tuesday. Yields tend to move inversely to bond prices.