Decline in sight in Europe, the geopolitical risk of comeback

PARIS, May 8 (Reuters) – European stock markets are expected to open lower on Friday following tensions between the United States and Iran in the Strait of Hormuz, pushing oil prices above the symbolic $100 per barrel mark.

According to early indications, the Paris CAC 40 is expected to decline by 0.68% at the opening. The Frankfurt DAX could fall by 0.86%, while the London FTSE 100 is set to drop by 0.71%. The EuroStoxx 50 index is expected to decline by 0.76% and the Stoxx 600 by 0.72%.

Geopolitical risk is likely to dominate trading in Europe again as the U.S. and Iranian armies have accused each other of violating the announced ceasefire. The United Arab Emirates also reported an Iranian attack with missiles and drones, activating air defense systems.

However, there were reports of progress in discussions between Washington and Tehran towards ending hostilities and negotiating a broader agreement. President Trump stated that the ceasefire was still in effect, raising hopes for a negotiated resolution and helping to mitigate the rise in oil prices.

Despite ongoing hostilities and elevated oil prices, the markets anticipate a limited duration of the conflict, explained Marija Veitmane, head of equities research at State Street Markets.

In economic indicators, the market awaits the official monthly U.S. employment report following the ADP survey which showed higher job creations in April than expected, and the “Jolts” report which indicated a decrease in job openings in March.

On Wall Street, stocks finished lower on Thursday, influenced by Intel and other processor manufacturers, in the face of uncertainty regarding the resolution of the conflict between Iran and the U.S.

In Asia, the Nikkei index in Tokyo fell on Friday, driven by concerns about renewed hostilities between the U.S. and Iran. The MSCI index for Asia-Pacific (excluding Japan) also declined. In China, both the Shanghai SSE Composite and CSI 300 indices were pulled down by tensions between the U.S. and Iran.

In the energy sector, oil prices rose due to the renewed conflicts between the U.S. and Iran, threatening a fragile ceasefire and dimming hopes for progress on reopening the Strait of Hormuz.

In the currency markets, the dollar advanced slightly against a basket of reference currencies, while the euro and pound made modest gains.

This article was written by Claude Chendjou and edited by Augustin Turpin.