Stock Market Turmoil Kicks Off the Week - Ukraine Conflict and Interest Strain
The German stock market, represented by the DAX, experienced a significant drop on Monday, with the index closing at 15,011.13 points - a decline of 3.80 percent compared to Friday's close.
The market reaction was primarily driven by the new US-EU trade deal announced over the weekend, which imposed a 15% tariff on most EU goods entering the US. This trade deal created uncertainty and pressure on German and European equities, particularly impacting sectors exposed to tariffs such as industrials and automotive.
Beyond the trade deal, ongoing macroeconomic challenges such as liquidity crunches, global trade uncertainties, and the lingering effects of Trump-era tariffs created a fragile market environment in 2025, adding to the downward pressure on the index.
The DAX’s composition with a strong weighting toward industrial, automotive, and technology sectors made it vulnerable to tariff-related disruptions. Defensive sectors like utilities and pharmaceuticals were less affected.
The escalation of the Russia-Ukraine conflict and fears of rising interest rates due to persistent inflation also contributed to the drop. So-called pandemic winners like HelloFresh and Delivery Hero continued to experience significant losses, with declines of over seven percent on Monday.
The European common currency weakened on Monday afternoon, with one dollar equivalent to 0.8839 euros. The weakening currency could potentially impact the overall economic outlook for the region.
Contrary to expectations, the fear of rising COVID-19 infection numbers remained insignificant in influencing the price losses. The oil price fell sharply, with a barrel of the North Sea Brent crude costing 85.62 US dollars, a decrease of 227 cents or 2.6 percent from Friday.
The gas price increased by nearly 20 percent on Monday, with a megawatt hour (MWh) for delivery in February costing 94 euros.
Since that drop, the DAX has shown signs of stabilization, with tactical positioning favoring defensive sectors and adjustments related to European Central Bank policy easing and currency effects.
Other sectors, aside from industrials and automotive, may face finance challenges due to the new US-EU trade deal. The uncertainty and pressure on European equities could have implications for other finance-based sectors.
Given the fragile market environment in 2025 and the DAX's composition, it's worth considering the potential impact of tariffs on other finance sectors in Germany and Europe.
