DAX forecast: Stocks bounce as Trump weighs end to Iran conflict, but is this another false dawn?

Equities have steadied somewhat so far into Tuesday’s session, finding a bit of a floor on reports that the US may be prepared to wind down military operations in Iran—even if the Strait of Hormuz remains shut. That’s hardly reassuring for the global economy, mind you. Without a clearer route to lower energy prices, the relief could prove short-lived. With WTI crude pushing above $100 a barrel, we may start to hear more conciliatory tones from Washington, and that in turn could weigh on oil prices and lift sentiment in stock markets. The danger, however, is that this proves yet another false dawn. If that’s the case, equities and risk-sensitive currencies could quickly find themselves back under pressure. Meanwhile, there’s a fair amount of data due this week, but frankly, it’s all secondary. Unless we see genuine signs of de-escalation in the Middle East, macro releases will struggle to move the dial in any meaningful way. We maintain a cautious DAX outlook for now.

 

Oil shock keeps markets on edge

 

The past month has been anything but calm. The conflict has rattled markets, with Iran responding to US and Israeli strikes by effectively blocking the Strait of Hormuz.  That disruption has sent crude oil prices soaring, fuelling fresh concerns about an inflationary resurgence. In the US, petrol prices have climbed above $4 per gallon for the first time since 2022, which will not go unnoticed by policymakers or consumers, and it may be the reason why Trump is reportedly looking to end the conflict in Iran.

 

While Trump may be considering an end to hostilities, the key issue—the status of the Strait—remaining unresolved will be what’s more important from the market’s point of view. It’s difficult to see Iran stepping back without extracting concessions. Even if the US disengages militarily, keeping the Strait closed to Western allies would maintain significant economic leverage—and, in truth, leave markets facing the same underlying problem.

 

Technical DAX forecast: Analysis and levels to watch

 

The German index is now testing a key area of resistance following a rebound triggered by the Wall Street Journal report.

 

As seen on the daily chart, the index has moved back into the 22,700–22,900 zone, an area that previously acted as support. The index bounced from this region twice—first in November and again in early March—before eventually breaking below it decisively later in the month.

 

Since then, this zone has turned into resistance. Although the market has attempted to reclaim it on a couple of occasions, those moves have lacked conviction, and price has failed to secure a sustained break above it.

 

Once again, the index is testing this critical resistance area. If sellers manage to defend this level, we could see a renewed move lower towards the range lows, with 21,860 marking the most recent downside level.

 

Below that, a major long-term support zone sits between 21,000 and 21,500. This area is particularly significant as it combines previous breakout zone, the 61.8% Fibonacci retracement level and a bullish trendline extending back to October 2022. This confluence makes it a strong technical support region.

 

But whether we will dip into that long term support zone and get any reaction will pretty much depend on developments in the Middle East and whether we see meaningful de-escalation in the conflict.

 

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R