DAX forecast: Crude oil spikes as stocks tumble amid US-Iran re-escalation

After a long and eventful first half of the year dominated by the US-Israel war on Iran and Trump’s constant flip-flopping, the last thing investors, and frankly anyone else, needed with the summer holidays approaching was a return of the same geopolitical environment. Unfortunately, it looks like we could be heading back to that. Crude oil has spiked over the last couple of sessions having just returned to pre-war levels just a few days ago, while European indices such as the DAX and Ibex were nursing losses of 2-3% at the time of writing.

 

 

Will Trump TACO if oil rises further?

 

Whether Trump later tries to calm nerves by walking back on his comments remains to be seen. I suspect Trump will want to avoid a full-scale escalation and if so, we might not see the same sort of price action in oil that we did during the height of the conflict a few months ago. But his comments certainly increase the risk of further supply disruptions from Iran or the wider Middle East if Tehran now chooses to close the Strait of Hormuz again. Let’s see how things will evolve over the next few days, but I hope that we don’t get to the same situation as before.

 

FOMC minutes to be overshadowed by geological tensions

 

Markets weren’t initially taking the re-escalation in US-Iran tensions too seriously earlier this week. But today, that seems to have changed. Therefore, it is likely that less attention will be paid to any macro data. The minutes of the Fed’s meeting in June will be released tonight, and markets expect them to reinforce the hawkish message and keep the dollar largely supported. But it is all about oil again, and what it means for inflation and interest rates.

 

Trump’s comments at the NATO summit rattled markets this a.m., triggering a risk-off move that saw European stocks and US futures take a tumble. Speaking to reporters, the US president declared that the memorandum of understanding with Iran was “over” and described Iranian leaders as “sick people”, adding that he no longer wanted to engage with them.

 

That shift in tone has effectively killed hopes of renewed diplomacy. Just days ago, this week was expected to provide a breather, with both Washington and Tehran stepping back ahead of another round of talks. Instead, we’re back to square one, with fears of further escalation once again dominating market sentiment.

 

The reaction has been swift. Oil prices have surged, with Brent climbing around 10% since yesterday to trade near $80 a barrel, as traders price in renewed risks to supply and growing concerns over the Strait of Hormuz. Rising energy prices are also reviving inflation fears, prompting a hawkish repricing across financial markets and pushing US Treasury yields higher.

 

European stocks tumble as Trump turns on Spain too

 

European equity markets have taken the brunt of the sell-off with the Spanish Ibex falling nearly 3% and DAX slipping around 2%. Trump also turned his attention to America’s European allies, singling out Spain over its defence spending and warning of potential trade action.

 

With geopolitical tensions rising again and oil leading the charge higher, markets are once more grappling with the prospect of stickier inflation and a more hawkish Federal Reserve. If the situation fails to de-escalate in the coming days, volatility is likely to remain elevated.

 

Technical DAX forecast and levels to watch

 

From a technical analysis perspective, the German DAX index appears to have formed a false breakout above the January 2026 high of 25,512. The failure to hold above that level following last week’s breakout is not a particularly bullish signal.

 

 

That said, the trendline was still intact at the time of writing and was being tested around the 24,850 area. The technical DAX forecast would turn more decisively bearish if the most recent low, set on 26 June at 24,550, were to give way. If that happens, the index would have formed its first lower low, which would significantly weaken the bullish case.

 

However, as long as that support remains intact, we’ll continue to give the bulls the benefit of the doubt for now. Even so, the recent price action has not been especially encouraging, so the market now needs to regain some bullish momentum to reignite the existing uptrend.

 

The key level to watch is 25,512, the January all-time high. That level needs to be reclaimed to re-establish the broader bullish trend. Before then, initial resistance comes in around the 25,000 level, followed by the 25,100 area.

 

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R