Hopes for a swift end to the conflict faded throughout the week, driving up fuel prices, reigniting inflation fears, and casting a shadow over equity and fixed-income markets.
Iran intensified attacks across various points in the Middle East, and its new supreme leader, Mojtaba Khamenei, asserted that the Strait of Hormuz maritime route would remain closed. This message reinforces the scenario of a protracted confrontation and more expensive crude oil.
In parallel, the U.S. dollar has solidified its position as the preferred refuge during the turbulence, putting pressure on other currencies. The greenback was heading for its second consecutive week of gains, accumulating a 2% rise since the outbreak of the war in late February.
Oil continued to trade around $100 per barrel (surpassing that threshold in the case of Brent crude), although it eased slightly on Friday after the United States issued a 30-day license for countries to purchase Russian oil and petroleum products currently stranded at sea.
Against this backdrop, investors are already looking toward next week's central bank calendar--including meetings of the Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of England (BoE), among others--with no changes to interest rates anticipated.
The specter of higher inflation has led markets to rapidly readjust their expectations for central banks this year. Traders now foresee barely 20 basis points of cuts from the Federal Reserve, compared to the 50 basis points priced in last month.
"The keys for investors to watch in this scenario are the expansion and duration of the conflict and its impact on energy, with the main short-term risk focus being the rise in inflation due to higher energy prices, potential supply chain issues, or fertilizers (impacting food prices)," said Natalia Aguirre, Director of Analysis and Strategy at Renta 4, in a report.
"A second derivative would be lower growth if the conflict intensifies and extends over time, assuming there are no stimuli to counteract it," she added. "This context poses problems for central banks, which could see delays in their rate cuts (in the case of the Fed), while the market begins to price in rate hikes by the ECB, although we believe that would be a mistake, making little sense in the face of a supply shock and with downside risks to growth."
In this context, at 0802 GMT on Friday, the Spanish benchmark IBEX 35 was down 161.40 points, or 0.95%, at 16,976.50 points, while the FTSE Eurofirst 300 index of major European stocks retreated 0.58%.
For the week as a whole, the IBEX 35 shows a decline of 0.56%.
In the banking sector, Santander lost 1.78%, BBVA fell 1.84%, Caixabank shed 0.93%, Sabadell dropped 1.25%, Bankinter gave up 1.29%, and Unicaja Banco lost 0.57%.
Among major non-financial stocks, Telefónica retreated 0.65%, Inditex shed 1.37%, Iberdrola gave up 0.18%, Cellnex gained 0.17%, and the oil company Repsol rose 0.94%.
(Reporting by Tomás Cobos; editing by Benjamín Mejías Valencia)
