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Germany's DAX Index Falls Amid Renewed Middle East Tensions

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German shares declined on Wednesday, with the blue-chip DAX index down 0.97%, as reignited tensions between the US and Iran are seen to jeopardize a potential peace deal.

The US and Iran exchanged overnight strikes after US President Donald Trump accused Tehran of shooting down a US Army Apache helicopter over the Strait of Hormuz. After the strikes, Reuters reported that Iranian Foreign Ministry spokesperson Esmaeil Baghaei said Iran is reevaluating talks with Washington, noting that diplomatic efforts have stalled due to repeated ceasefire violations. Later, Trump posted on Truth Social that Iran will have to "pay the price" for delaying negotiations.

Amid a quiet day for local economic news, market watchers await the European Central Bank's monetary policy decision on Thursday. In a preview note, Berenberg warned that the ECB's expected 25-basis-point rate hike will worsen a eurozone outlook already affected by the Iran war.

"Nonetheless, the ECB should look through the adverse supply shock rather than weakening the Eurozone economy further through rate hikes that will exacerbate the damage to domestic demand, in our view. Monetary policy cannot prevent the surge in energy prices caused by the Iran supply shock... The key question for the ECB is thus whether the stagflationary supply shock could turn into a more entrenched inflation problem," Berenberg wrote.

On the corporate side, adidas (ADS.F) climbed 2.84%, as RBC Capital Markets upgraded its rating for the German sportswear company to outperform from sector perform and raised its price target to 210 euros from 170 euros.

"Today, adidas is delivering [direct-to-consumer] led revenue growth with healthy forward order visibility and consistent execution. It offers elevated 3yr EPS growth outlook (+25% vs coverage average 11%) at a discounted valuation (13x FY27E P/E). Momentum is broad based across regions, categories and sports verticals which is encouraging, although we would like to see better [free cash flow] generation," RBC said.

Meanwhile, London's Financial Times reported that Mercedes-Benz Group (MBG.F) is said to be entering a partnership with German defense startup Tytan Technologies to co-develop a mobile anti-drone system. The German carmaker shed 1.25% at the end of the session.

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$^DJI$^IXIC$^SPX$AMZN$ARM$MRVL$MSFT$QCOM$SPCX
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$^DJI$^IXIC$^SPX$ARM$DELL$MRVL$QCOM
Asia Markets

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