Oil Price Surge Weighs on Risk Assets as DAX Faces Hawkish ECB Decision

Rising oil prices and elevated bond yields are weighing on risk appetite in European markets and US indices, pressuring major equity benchmarks like the German DAX.

The ECB's rate decision on Thursday is expected to be a hike, with rising oil prices threatening to re-accelerate inflation. WTI crude oil has climbed to its highest level since early June, closing near $95 per barrel, amid ongoing US-Iran tensions and supply disruptions in the Middle East.

For investors, this combination of resilient US employment and renewed pressure from energy prices is a hawkish signal, potentially reversing progress on inflation and squeezing consumers and businesses. The DAX forecast remains tilted lower, especially if crude oil prices continue to rise and/or the ECB turns out to be more on the hawkish side of things.

From a technical analysis perspective, the German DAX has broken down below its 21-day exponential average, giving the bulls their first warning sign that the rally may have come to an end. Initial support comes in around 25,900, with potential resistance levels at 26,166 and 26,355.