German Stocks Surge on Peace Hopes, Eye Trump's Next Move

Germany's DAX surged on hopes of US-Iran de-escalation, sparking a sector rotation into defense stocks like Rheinmetall while pressuring energy-sensitive shares.

A wave of optimism regarding the Middle East conflict propelled Germany's benchmark stock index to a powerful start in April on Wednesday. The DAX advanced approximately 2.6%, marking a robust recovery from a March performance that had erased nearly ten percent from the index.

The catalyst was a statement from U.S. President Donald Trump, who declared on Tuesday that America would halt attacks on Iran within two to three weeks—"whether we have a deal or not." Financial markets responded with a broad return of risk appetite. Subsequently, the price of Brent crude oil dropped about four percent, falling below the $100 per barrel threshold.

Sector Rotation Defines Trading

The session revealed a clear rotation between industry sectors. Defense stocks emerged as the standout winners. Rheinmetall soared 9.5%, buoyed by a Goldman Sachs research note that added the company to its "European Conviction List." Analyst Sam Burgess identified the firm as a top sector pick, citing three decades of underinvestment in European defense as a structural tailwind.

On the losing side, biofuels producer Verbio slumped 11.6%. The company had recently benefited from elevated energy prices—an advantage that diminishes swiftly with declining oil costs. BASF also ranked among the weakest DAX constituents, retreating 2.8%.

Technical Breakout Faces Fresh Test

From a technical perspective, the DAX's jump above the 23,000-point level breached a significant resistance zone. The next relevant resistance now sits at 23,476 points, just above the current level of approximately 23,299 points.

The critical question is whether President Trump's credibility as a peacemaker is sufficient to drive the index past this barrier. Market observers point to contradictory signals from Washington in recent weeks, where repeated hints of an imminent agreement were followed by warnings of potential escalation. Trump has scheduled a "major speech" on the Iran conflict for 3:00 AM CEST early Thursday. Should it deliver a credible de-escalation path, a test of the 23,476-point resistance appears likely. However, if the situation remains ambiguous, a relapse below the 23,000-point mark threatens. This risk is compounded by a subdued growth outlook, as leading German economic research institutes now project the country's economic expansion for 2026 at just 0.6%.