Frankfurt falls 0.58% amid Israel-Iran tensions and rate hike fears

The DAX 40 index in Frankfurt closed down 0.58% on Monday, reflecting a market unsettled by escalating geopolitical tensions between Israel and Iran, a surge in oil prices, and growing anticipation of interest rate hikes. The selective index finished the trading day at 24,616.22 points.

Adding to the negative sentiment, German industrial orders saw a substantial decline of 3.8% in April compared to March, a figure worse than economists had predicted, although they rose 1.6% year-on-year. The renewed conflict in the Middle East has pushed Brent crude oil prices near $98 per barrel and WTI to nearly $95, fueling expectations that the U.S. Federal Reserve will raise interest rates. This prospect is also increasing the yield on ten-year U.S. Treasury bonds to over 4.6%.

Higher interest rates typically dampen investment in growth sectors like artificial intelligence, leading to a downturn in tech stocks. The potential initial public offering of Elon Musk's SpaceX is also expected to trigger sell-offs in AI, semiconductor, and chip manufacturing companies as investors shift capital towards the aerospace giant, valued at approximately 1.5 trillion euros. In Frankfurt, chipmakers experienced some stabilization after a significant drop on the tech-heavy Nasdaq index the previous Friday, which had fallen over 4% on fears of interest rate hikes following strong U.S. labor market data. Infineon, a semiconductor producer, saw its shares rise 1.2% to 78.24 euros after a sharp 9.1% decline on Friday.