For European Investors, War, Oil and the Fed Don’t Matter — US Earnings Do

EBM Newsdesk Analysis

London, 27 April 2026 — On Wednesday afternoon, Jerome Powell will chair what is almost certainly his final meeting of the Federal Open Market Committee before his term as Federal Reserve Chair expires on 15 May. The meeting comes against a backdrop that would, in any normal year, have markets in defensive crouch: a US war with Iran entering its fourth month, the Strait of Hormuz still closed to most shipping, oil at $104, an assassination attempt on Donald Trump over the weekend, and the most contested Fed Chair succession in modern American history playing out simultaneously in the Senate Banking Committee. The S&P 500 closed at a fresh all-time high on Friday. The NASDAQ did the same. Asian and European indices opened higher on Monday. The disconnect between geopolitics and markets has never been wider — and the editorial question for European business leaders is whether that disconnect is rational, or whether something is about to break.

The week’s macro calendar is the most consequential of the year. Four major central banks — the Bank of Japan tonight, the Federal Reserve on Wednesday, the Bank of England and European Central Bank on Thursday — will hold policy meetings. None is expected to move rates. All will deliver inflation outlooks that determine the next six months of European corporate planning.

The Earnings Story Driving Markets

The single largest force pushing global markets to new highs is the US earnings season, which has so far delivered exceptional numbers. Per FactSet, 84% of S&P 500 companies that have reported have beaten EPS expectations, with 81% beating revenue forecasts and an aggregate year-on-year earnings growth rate of 15.1% — on track for the sixth successive quarter of double-digit growth. This week, 180 S&P 500 constituents report, including five of the Magnificent Seven. The catalyst for last week’s record close was Intel’s blow-out earnings report, which sent the stock up roughly 25% to all-time highs and dragged the broader chip sector with it.

For European investors, the implication is direct. American corporate earnings momentum is now the single largest force overriding what would otherwise be material geopolitical risk premia. As long as the earnings beat continues, neither the Iran war nor the Hormuz closure nor the Fed succession crisis is being priced into US equity valuations.

The Powell-Warsh Succession

The political backdrop to Wednesday’s FOMC is the most contested Fed Chair handover in modern history. Powell’s term ends 15 May. Trump’s nominated successor, Kevin Warsh — a former Fed Governor and Trump-aligned monetary hawk on paper, but viewed by some Republicans as insufficiently committed to lower rates — faces a stalled Senate confirmation that, until last Friday, hinged on a Justice Department investigation into Powell’s handling of the Fed’s headquarters renovation costs. The DOJ dropped that investigation on Friday, removing the procedural block that Senator Thom Tillis had imposed. Warsh’s path is now clearer, but not certain.

If Warsh is not confirmed by 15 May, Powell has indicated he will stay on as Chair pro tempore until his successor is sworn in. Trump has stated publicly he would fire Powell in that scenario, which would almost certainly trigger immediate legal action from Powell — potentially the first time in the Fed’s 112-year history a sitting Chair has sued the executive branch over an attempted dismissal. Markets are pricing none of this risk.

The Dollar’s Quiet Weakness

One signal worth flagging: the US Dollar Index has fallen back to the 98.00 region from 98.66 on Thursday, a level that traders are watching closely for a potential break. The dollar’s traditional flight-to-safety bid during geopolitical conflict has been notably absent throughout the Iran war — investors appear to have concluded that nothing significant will happen on the diplomatic front in the near term, removing the safe-haven premium. With the ECB, BoJ, and Bank of England all expected to raise interest rates later this year while the Fed holds, the rate-differential case for sustained dollar strength is weakening.

For European exporters with significant USD-denominated revenues — particularly European pharmaceuticals (Roche, Novartis, Sanofi) and luxury (LVMH, Hermès, Kering) — sustained dollar weakness compounds existing translation pressure. Q2 earnings reports in July will likely surface the cumulative effect.

The European Read

Three implications matter for European business leaders this week.

First, the European exposure to the Strait of Hormuz disruption is materially worse than the US exposure. American investors are treating the Iran war as background noise because US energy supply is largely insulated. European refiners, petrochemicals, shipping, and downstream industrials are not. The continued boarding of container ships by Iran’s Islamic Revolutionary Guard Corps over the weekend — two vessels seized at anchor near the Strait — is a genuine operational threat to European supply chains that US markets are pricing as zero.

Second, the German GfK Consumer Climate Survey released this morning came in at its lowest level since January 2023, signalling that European consumer demand is not following American optimism. The widening gap between US corporate earnings strength and European consumer weakness is the structural question that ECB President Christine Lagarde will be asked to address Thursday.

Third, the Fed succession drama has direct implications for the euro and the European bond complex. A Powell-Trump legal confrontation over the chairmanship would inject genuine uncertainty into US monetary policy at exactly the moment European exporters need the dollar to behave predictably. European treasurers should be hedging the right tail.

The market message this week is straightforward: nothing matters except earnings. The macro test arrives on Thursday with Lagarde and Bailey. The political test arrives on 15 May with Powell.

Related Analysis

• The Fed Chair succession crisis and what European markets should expect
• Why the Iran war is hitting European earnings harder than US earnings
• European equities at fair value: the next 12 months get harder