Will Lebanon ceasefire pave the way for Iran deal? 

Mainland European markets are on the rise, although stock markets in the region are struggling to maintain the same pace despite hope of a move towards a permanent ceasefire in the Middle East. The strength seen in US markets yesterday was once again driven by the tech sector, with the strongest area in the UK FTSE 100 index similarly being in the software space (LSEG &RELX). Notably, with equity markets on the rise, we are seeing weakness for utilities and miners today. That comes despite the particularly notable rise for metals such as Copper, Lithium, Iron Ore, and Silver this week. 

With food and energy prices expected to hamper businesses, stagflation remains a hot topic in the investing community. While the Fed have a dual mandate that will also factor in the employment situation, European central banks are faced with higher price pressure and a particular focus on price stability. Nonetheless, ECB member Dolenc has noted that the recent pullback in energy prices does ease calls for a rate hike for the time being. Airline stocks have been in the limelight as KLM cancel 160 flights in the face of Jet fuel shortages. For some this is a warning sign of what could become a wider crisis for the industry if the Straits remain closed. However, the temporary nature of this shutdown does also mean that many will view such a pullback as a potential buying opportunity for those with long enough investment horizons. 

The ceasefire between Israel and Lebanon takes hold today, providing the basis for a wider deal with Iran that could potentially reopen the Straits. Crucially while a deal with Lebanon is good news, the conflict has been targeting Hezbollah rather than Lebanon, with Trump calling for the Iranian proxy group to act “nicely.” Given the Israeli ambitions to stake a claim in Southern Lebanon to shield Northern Israel, there will be many who remain highly sceptical over the potential for a long-lasting ceasefire between the two nations. Looking ahead, the possibility of an escalation in the conflict seems as likely as a deescalation, with weekend volatility less prevalent with each passing week. There will be many who believe the current negotiations are simply a cover as the US move additional troops into the region ahead of a ground offensive. However, for the time being there is a belief that we are moving in the direction of a potential deal, with Pakistan stating that a US-Iran deal is “reachable”.