Is the war in the Middle East over?

The two-week ceasefire between the U.S. and Iran, in effect since April 8, has provided some breathing room. But does this really mean the conflict has been resolved? While the agreement on a ceasefire in the Middle East has reduced uncertainty, it has by no means eliminated it entirely. The euphoria may therefore be overblown. In our view, the agreed-upon terms of the negotiations are not easily enforceable. For instance, the ceasefire is supposed to apply to the entire region, yet Israel has already stated that it does not intend to adhere to a ceasefire in Lebanon. Furthermore, there has been no binding commitment from Iran to keep the strategically important Strait of Hormuz open. The global economic situation remains fragile.

The U.S. and Israeli airstrikes on Iran on February 28 led to a de facto blockade of the Strait of Hormuz, interrupting approximately 20% of global oil shipments (Source: Bloomberg, April 2, 2026). This supply shock drove the price of Brent crude oil in March from around $61 per barrel to a high of about $111 per barrel (Source: Bloomberg, April 2, 2026), reigniting inflation fears and forcing a reassessment of central banks’ interest rate paths. The prevailing narrative is that this is a geopolitical supply shock and not a demand-driven development.

Oil prices remain high

Persistently high oil prices have a dampening effect on economic growth. A rule of thumb suggests that a 10% increase in the oil price reduces economic growth by about 0.1%. In recent weeks, the conflicts have led to massive supply bottlenecks, as virtually no oil was exported from the Middle East. These supply shocks are likely to persist due to the destruction of infrastructure, which could stabilize the oil price at a high level.

Inflation Rising Again

At its March meeting, the European Central Bank (ECB) raised its inflation forecast for 2026 to 2.6% and lowered its GDP growth forecast to 0.9% (Source: Bloomberg, April 2, 2026). The Iran conflict led to a significant shift in market expectations regarding the ECB’s monetary policy. Prior to March 1, 2026, market participants had anticipated potential interest rate cuts in 2026. Inflation in the EU could rise above 3% again due to high oil and gas prices as well as second-round effects. Consequently, it can be assumed that inflation could remain above the central banks’ target levels.

A key question many market participants are now asking is: “How long will the ceasefire last?” Overall, we therefore remain cautious and view the current market reaction as a temporary rebound that does not fully reflect the underlying risks and uncertainties.

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