DAX: Earnings Expectations Now Higher Than Before Iran War
German markets defy Iran conflict fears with rising earnings forecasts
If we imagine the DAX index as a single "stock" that could be purchased at its current level of 24,227 points, the expected earnings per share (for a 12-month outlook) stood at €1,585 just before the outbreak of war with Iran. Seven weeks later, that figure now sits at €1,588. The chart begins in January, and the trend is clear: The Iran conflict triggered a brief slump in earnings forecasts, just as DAX-listed stocks saw their share prices tumble. While the DAX has yet to fully recover its pre-war losses, market expectations for corporate earnings have actually edged slightly higher than they were just before hostilities began. Optimism, it seems, prevails.
MDAX
The same holds true for Germany's "second-tier" index. Just before the war, the projected 12-month earnings per share for MDAX companies stood at €1,914—today, that figure is €1,922. The following chart also starts in January, showing the same dip: The Iran conflict cast a shadow over MDAX earnings expectations for several days. But over the past week, market forecasts have rebounded, closing the gap created by the initial shock.
P/E Ratio Outlook
Across all 40 DAX stocks, the average forward price-to-earnings (P/E) ratio for the next 12 months stands at 15.94. For the MDAX, the figure is 17.66. Both values hover around what market participants generally consider a fair valuation—neither cheap nor expensive. For comparison, the U.S. benchmark S&P 500 currently trades at a P/E of 21.58. Ratios below 10 are typically seen as deeply undervalued, between 10 and 20 as normal, and above 20 as increasingly expensive.
What Does This Tell Us?
What do these earnings expectations—which are now marginally higher than they were just before the late-February outbreak of war—actually signify? For U.S. markets as well as the DAX and MDAX, the message is clear: Markets and analysts are "looking past the end of the Iran conflict," operating on the assumption that war and its economic fallout are temporary disruptions. In a few months, everything will return to normal, and corporate profits will flow as they did before. That bet could pay off—but it's not without risk. The reality may be that the Iran conflict's impact on the real economy proves deeper and more prolonged than anticipated, with lasting consequences for businesses and national economies.
FMW, using data from Bloomberg Terminal
