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What US strikes on Iranian nuclear sites mean for European markets

Recent US airstrikes on three Iranian nuclear facilities have triggered global market caution and could have wide-reaching implications for the interiors and furnishings industry, particularly via rising oil prices and economic uncertainty.

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On Sunday, US President Donald Trump described the operation as "very successful" while Defence Secretary Pete Hegseth claimed the military had "obliterated" the targets. Iran, however, reported only limited damage. As ING analysts observe: 'This leaves us with the all-too-familiar sense that we understand far less than we thought we did this morning.'

Although Iran's military response has so far been restrained, four potential courses of action remain, including escalation or disruption of the Strait of Hormuz, a key global oil and LNG transit route. ING warns that 'an effective blocking of the Hormuz would lead to a dramatic shift in the outlook for oil, pushing the market into deep deficit,' with oil prices potentially rising to $120/bbl in the short term and beyond $150/bbl with prolonged disruption.

For the interior design sector, this raises immediate concerns. Oil-derived materials, from synthetic textiles to plastics, could face cost pressures, impacting production and pricing. Logistics and global supply chains may also be disrupted, especially for manufacturers reliant on Asia-bound shipping routes through Hormuz.

'Uncertainty at elevated levels is another dampening factor for economic activity in the US and eurozone,' ING writes, highlighting potential demand softening among consumers and delays in capital spending, both critical to interiors, luxury and design markets.

The European Central Bank may now face renewed inflation pressure. 'Simply applying today's oil prices to the ECB's own June macro projections would lift inflation by 0.3pp this year and 0.6pp next year,' the analysts note, suggesting that planned interest rate cuts may be delayed, possibly cooling the consumer property and renovation market.

Although the US is relatively insulated from direct oil supply shocks, 'higher global oil prices would weigh on US consumers and businesses.' In response, ING expects the Federal Reserve to maintain its "wait-and-see stance," with a potential rate cut delayed until December.

Despite the geopolitical escalation, credit markets and bonds remain relatively unmoved. 'Credit is still supported by the large demand and cash readily available,' ING writes, but notes that the 'growing list of volatility drivers' could shift market dynamics quickly.

For the interiors industry, a watchful eye on oil, shipping, and macroeconomic confidence will be key in the coming months.

More information:
ING
www.think.ing.com

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