François-Xavier Chauchat, a member of the investment committee, economist and strategist at Dorval AM, and co-manager of the Dorval Convictions fund (FR0010565457) alongside Sophie Chauvellier and Gustavo Horenstein, analyzes recent movements in the oil market and their macroeconomic implications for Europe. Amid a strengthening euro, a partial recovery in production, and investor caution, he offers valuable insights for the summer of 2025.
June 16, 2025 - The recent rise in oil prices, fueled by tensions between Israel and Iran, adds a new element of uncertainty to the summer economic outlook. However, for Europe, this impact remains moderate, mainly thanks to the euro’s appreciation against the dollar, which mitigates the rise in prices in local currency.
Following the relief brought by the trade de-escalation since April 10—which drove the MSCI World Index in dollars to a new high on June 12 (Chart 1)—investors are wondering about the next phase. The summer of 2025 promises to be exciting, with both upside and downside macroeconomic risks depending on U.S. economic data—which is reassuring for now—and whether, and under what conditions, trade negotiations with Trump’s America will be extended.
Admittedly, the perception of risk linked to the trade war seems to have faded, relegated to the background by many investors. Yet this issue continues to weigh on certain market segments. In Europe, stocks in the sectors most exposed to trade tensions—luxury goods, automotive, consumer goods, and industrials—are still lagging significantly behind (Chart 2). While other factors also explain their underperformance, the trade war contributes to maintaining a substantial risk premium. The Trump administration, particularly frustrated by the European Commission’s nitpicking inertia, could indeed reignite the issue at any moment. Conversely, a lull perceived as sufficiently lasting would give these stocks a boost.
Among the factors to watch this summer, the resurgence of geopolitical tensions in the Middle East since June 12 raises new questions, particularly regarding inflation. It remains to be seen how far these tensions will go and how long they will last. What is certain is that they are occurring against a backdrop of a resumption of oil production by Saudi Arabia and other OPEC members, which could limit the surge in prices. Furthermore, the downward trend of the dollar is playing a stabilizing role for many consumer countries, including those in the eurozone. Expressed in euros, the price of Brent remains significantly below its level at the start of the year (Chart 3). At this stage of the tensions, neither investors nor the European Central Bank have any reason to be particularly concerned.
