Energy prices are surging: UBS bank reveals investment opportunities in the market
The Swiss bank estimates that Europe will continue to face inflation and energy pressures, but identifies potential in stocks and bonds, and estimates that Trump's tariffs will not lead to another sharp spike in the cost of living.
Geopolitical tension in the Middle East, rising energy prices, and the economic measures of the Donald Trump administration continue to be at the center of attention for investors worldwide. Despite the uncertainty, UBS believes that interesting investment opportunities still exist in the European market, especially in stocks and bonds.
According to the Swiss bank's daily market review from last Friday, the European Central Bank left the interest rate unchanged at 2.25%, following a hike implemented in June. However, UBS defines the decision as a "hawkish hold," because policymakers continue to express concern over rising inflation, mainly following the surge in energy prices against the backdrop of the escalation between the USA and Iran. The price of Brent crude oil reached 100 dollars per barrel, while natural gas prices in Europe climbed to a four-month high.
Despite this, UBS estimates that the European economy will continue to grow at a moderate pace, with a growth forecast of 0.8% in 2026 and 1.2% in 2027. The bank believes that another interest rate hike of a quarter of a percentage point in September is still possible, but emphasizes that market forecasts, according to which the interest rate will climb to about 3% within a year, are too aggressive.
In the investment sector, UBS analysts continue to recommend stocks in the Eurozone and estimate that the upward trend will expand in the second half of the year. According to them, European companies are benefiting from a return to profit growth and are expected to benefit from extensive investments in the fields of artificial intelligence, electrification, the defense industry, and energy security.
The bond market also receives a positive recommendation. UBS estimates that bond yields are expected to decline over the coming year, and therefore recommends focusing on medium-term government bonds of strong countries such as Germany, the Netherlands, and Austria, alongside corporate bonds with high investment ratings, which, according to them, still offer an attractive combination of yield and risk.
At the same time, the review also addresses the new tariff move by US President Donald Trump, who imposed tariffs of 10% to 12.5% on imports from dozens of countries. Despite the move, UBS estimates that concerns about the cost of living and continued inflation will prevent the administration from significantly expanding tariffs in the near future. According to their assessment, the effective tariff rate in the USA is expected to remain in the range of 10% to 15%, which may help further moderate inflation and allow markets to maintain relative stability.
