Geopolitical Tensions Weigh Heavily on German Blue-Chip Index

German DAX faces sustained selling pressure amid Middle East tensions and spiking oil prices. Technical outlook turns bearish as index trades below key moving averages.

European equity markets remain gripped by uncertainty as the ongoing Middle East conflict continues to cast a shadow. The German DAX index faced renewed selling pressure on Thursday, having briefly dipped below the psychologically significant 23,000-point threshold. Rising crude oil prices are fueling persistent inflation concerns among investors.

It has been a volatile week for the benchmark. The index plunged to a ten-month low on Monday, coinciding with a spike in Brent crude prices to as high as $119 per barrel. A robust rebound of approximately 2.4% followed on Tuesday, triggered by comments from U.S. President Trump suggesting the war could end "soon." This optimism proved short-lived, however, with the DAX closing Wednesday's session down 1.37% at 23,640 points.

Energy Prices Dictate Market Sentiment

The escalated conflict is effectively disrupting transit through the Strait of Hormuz, keeping energy costs elevated. A swift resolution to hostilities and a normalization of oil production in the region currently appear unlikely. Although the International Energy Agency recommended the largest-ever release of strategic petroleum reserves, this measure was insufficient to durably calm market nerves.

A pronounced sector rotation is underway. Energy stocks are in demand, while travel and tourism equities are underperforming. Lufthansa was hit particularly hard; beyond the broader war-related pressures, the Vereinigung Cockpit pilots' union called for strikes on Thursday and Friday. Even SAP, a heavyweight component of the DAX, could not escape the downward momentum, shedding around two percent on Wednesday.

Technical Outlook Turns Bearish

The technical picture for the DAX has deteriorated noticeably in recent sessions. The index is now trading below its 50-, 100-, and 200-day moving averages, with all three key trend indicators currently flashing sell signals. The breached 200-day line, situated near 24,174 points, now acts as the first level of resistance.

On the downside, the next notable support level lies at 23,336 points. A breach of this level would bring the area around 22,937 points into focus—the daily low from November 2025. The index now sits roughly seven percent below its all-time high of 25,420 points, recorded in January.

As long as oil prices remain elevated and geopolitical tensions show no signs of abating, downward pressure is likely to persist. The latest U.S. inflation data, released today, could introduce additional short-term volatility, depending on whether the figures confirm or alleviate fears of a renewed acceleration in price growth.