Dax Index News: DAX Forecast Clouded by US-Iran Risks, Fed Policy Uncertainty

DAX Tumbles as Middle East Tensions and Tariff Threats Collide

Global equity markets saw red on Tuesday, June 17 as news hit the wires of the US deployment of jet fighters to the Middle East. The DAX slid 1.12% on Tuesday, June 17, reversing Monday’s 0.78% gain, closing at 23,435. Notably, the index closed below 23,500 for the first time since May 9.

Investors brushed aside better-than-expected German ZEW Economic Sentiment numbers, with the Middle East dictating risk appetite.

Following President Trump’s warning for Tehran to evacuate, fears of US involvement in the Iran-Israel conflict impacted risk sentiment. US attacks on Iran could trigger a broader Middle East conflict, potentially disrupting oil supply. Rising crude oil prices may fuel inflationary pressures, shifting sentiment toward central bank policy and the global economic outlook.

WTI crude oil rallied 5.17% on June 17, closing at $73.455.

Trade headlines added to the gloomy mood, with the US administration threatening tariff hikes on the healthcare sector. On June 17, Trump reportedly stated:

“We’re going to be doing pharmaceuticals very soon. That’s going to bring all the companies back into America. It’s going to bring most of them back into, at least partially back in.”

Autos, Healthcare, and Tech Stocks Slide

The threat of higher tariffs on pharmaceuticals left Fresenius Medical Care down 4.47%.

Demand concerns and uncertainty about a US-EU trade deal weighed on auto and tech stocks. Mercedes-Benz Group dropped 1.78%, with Volkswagen, Porsche, and BMW also posting losses. Infineon Technologies and SAP declined by 1.66% and 0.54%, respectively.

Wall Street Falls as US Deploys Fighter Jets

US markets retreated on June 17 amid increasing chances of US involvement in the Iran-Israel war. The Dow fell 0.70%, while the Nasdaq Composite Index and the S&P 500 declined 0.91% and 0.84%, respectively.

Weaker-than-expected US retail sales added to the gloomy mood. Retail sales fell 0.9% month-on-month in May, following a 0.1% drop in April. Given private consumption contributes over 60% to US GDP, a sharp drop in consumer spending could revive recessionary fears.

US Jobless Claims and the Fed in Focus

Later in the European session on Wednesday, June 18, initial jobless claims will give insights into labor market conditions. Economists forecast initial jobless claims to fall from 248k (week ending June 7) to 245k (week ending June 14).

A sharper drop may dampen bets on a 2025 Fed rate cut, pressuring risk assets. However, a higher reading could boost Fed rate cut expectations, potentially lifting risk sentiment.

While the data will require consideration, the looming FOMC interest rate decision, economic projections, and press conference may limit major market moves. Economists expect the Fed to keep rates at 4.5% after the European market close. However, the economic projections and press conference will be crucial for near-term market trends.

A steady or lower unemployment outlook and upward revisions to GDP, inflation, and Fed Funds Rate projections may affect demand for risk assets. Conversely, more dovish projections could lift sentiment. The European markets will react to the Fed’s guidance on Thursday, June 19.

While Wednesday’s economic data and Fed guidance require consideration, the Iran-Israel conflict and trade developments may have a greater impact on market trends.

Outlook: Key Catalysts for the DAX

The DAX’s near-term price outlook depends on reports from the Middle East, trade developments, the Fed, and ECB signals.

• Bullish Case: Easing EU-US trade tensions, de-escalation in the Middle East, and dovish FOMC projections could drive the DAX toward 24,000.
• Bearish Case: US strikes on Iran, US tariff threats, or hawkish Fed guidance may drag the DAX toward 23,000.

At the time of writing on June 18, the DAX futures dropped 129 points, while the Nasdaq 100 mini gained 24 points, signaling a choppy mid-week session.

According to Polymarket, the chances of US military action against Iran by July stood at 73%, down from 90% on June 16.

Technical Setup Suggests Cautious Optimism

Despite Tuesday’s sell-off, the DAX remains above the 50-day and the 200-day Exponential Moving Averages (EMA), signaling underlying bullish momentum.

• Upside Target: A breakout above 23,500 could support a move toward 23,750. A sustained move through 23,750 may pave the way to retesting 24,000.
• Downside risk: A drop below the 50-day EMA exposes sub-23,000 levels.

The 14-day Relative Strength Index (RSI), at 44.24, suggests the DAX has room to drop below 23,000 without entering oversold territory (RSI< 30).

Conclusion: Middle East, Tariffs, and the ECB

Traders should closely track developments in the Middle East, trade headlines, and central bank cues for guidance.

Explore our exclusive forecasts to assess whether improving trade sentiment could lift the DAX to new highs. Refer to our latest forecasts and macro insights here for further analysis, and consult our economic calendar.