After the sharp declines recorded this Monday in the European stock markets due to the crisis in Iran – more than 2% and -2.64% in the case of the Ibex – everything indicates that the cuts will continue this Tuesday on this side of the Atlantic. Euro Stoxx futures lose around 1% in a context in which geopolitical tension does not let up. Overnight, the Saudi Ministry of Defense reported that two drones hit the US embassy in Riyadh. US futures also fell by around 1%. Wall Street’s reaction the day before was, however, striking. Although the headlines got worse throughout the day—Saudi Aramco stopped operations at the country’s largest refinery after a drone attack; Iranian officials assured that they were not willing to negotiate and that they would fight; and President Donald Trump stated that the war could last weeks, not days, and that the US would send troops if necessary, doing “whatever it takes” to achieve its objectives—the US market managed to save the session. Oil prices retreated from their initial highs and as crude oil moderated gains, US equities turned higher. The S&P 500 and Nasdaq 100 closed with moderate gains, with US stocks outperforming their peers despite the prospect of a prolonged conflict, lower expectations of Fed cuts and a rebound in bond yields. The decline in oil seemed enough to reassure investors and justify buying on dips. That optimism, however, is fading. The tension has also been felt in Asia this morning, with falls of more than 3% in the Nikkei and sharp declines in the Kospi, which remained closed on Monday. Oil prices are rebounding again, with US crude oil back above $73 per barrel after falling towards $70 the day before. Natural gas in the US also rises, while 10-year Treasury bonds remain under pressure, in line with sovereign yields from Australia to Japan. American futures return to negative territory, which reopens the question about the resilience shown by Wall Street. «What now? A Goldman Sachs analyst argued that ‘the only direction from here is down’, suggesting a correction before further rises. I also believe that the recent decline in US indices has not been enough to reflect the changing risk profile facing big tech (as it turns to debt issuance to finance higher capex),» says Ipek Ozkardeskaya, senior analyst at Swissquote. The conflict in Iran enters its fourth day this Tuesday without a clear outcome. On Monday, US military leaders said more forces were heading to the region, and Trump said the war would last four to five weeks, although it could last «much longer than that.» The European Union has called for de-escalation and “maximum containment”, as well as the protection of the civilian population. COMPANIES AND MACRO At the business level, Thales, Alcon, ASM International, Kuehne und Nagel International and Schaeffler will publish results this Tuesday. On the macroeconomic front, preliminary inflation figures for the euro zone will be released, which are expected to remain around 1.7% in February. Furthermore, this Tuesday, March 3, the ‘Spring Declaration’ will be presented in the United Kingdom, a procedure that the Minister of Finance, Rachel Reeves, intends for it to go unnoticed and not become a major political and economic event, since her intention is to reserve the spotlight for the ‘Autumn Budget’ as the main fiscal event of the year. OTHER MARKETS The euro continues to weaken against a dollar that appreciates due to the tension. The euro is exchanged at 1.1663 dollars (-0.19%). Brent oil is now up 2.5% ($79.68) and WTI is up 1.92% ($72.60). Gold added 0.37 ($5,331) and silver lost 2.69% ($86.46). The yield of the 10-year American bond rises to 4.059%. Bitcoin is trading at $67,907 and Ethereum is trading at $1,992.
