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Michael Strobaek on why Lombard Odier still backs European equities despite global tensions
Article published in De Standaard, 6 May 2026.
Michael Strobaek, Chief Investment Officer at Lombard Odier, continues to believe in both European equities and emerging markets. However, in the short term there may be some pain, he says in an interview with De Standaard.
With the U.S. stock market index S&P 500 at record levels and European equities seemingly relatively unaffected by the conflict in the Middle East, it appears as though markets are underestimating the risks.
Michael Strobaek: “The markets are getting it right. I was always convinced that, in military terms, this would be a limited-scale war. That the United States and Israel would strike was clear. The aim is to shift the balance of power in the Middle East in favor of Israel and the U.S. You saw the typical Israeli approach there: eliminating the top leadership. Trump himself sent a signal after Venezuela that he would not accept other regimes turning to Russia or China for support. We are seeing a conflict between the major power blocs and possibly also a struggle for control over oil and critical raw materials that pass through the Strait of Hormuz.”
Europe will have to invest to climb out of the hole it has dug itself
Have the Americans misjudged the Strait of Hormuz?
“It is quite possible that the U.S. will now further build up its military firepower in the region in order to seize control of critical oil installations and thus control supplies to China. That would be a counter‑move by the U.S. against China, which has built up a strong position in rare earth metals. Financial markets see this as a new move in the power struggle between the major powers.
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Strobaek believes that oil prices will continue to fluctuate somewhere between 90 and 100 dollars, possibly somewhat higher. ‘But it will not turn into a larger conflict in the Middle East, let alone the beginning of the Third World War. This is an economic conflict, and that could last longer. Iran cannot win, but it also cannot lose. The U.S. will, in any case, try to keep the Strait of Hormuz open.’
The U.S. exports fossil fuels, while Europe faces two problems: defense and energy.
The gigantic blunder committed by the Germans, Swiss, and Belgians was the phase‑out of nuclear energy. While you have no natural energy resources, you shut down the most sustainable long‑term energy solution. What are the Germans doing now? Burning coal. Europe will have to invest to climb out of the hole it has dug itself. We cannot count on help from Trump. This comes at a time when several European government leaders are very weak.
What does this mean for the European equity markets?
I do not share the view that Europe is unattractive for equity investors. Europe has performed quite well since the start of the year, even better than the U.S. We have increased the weighting of European equities and will maintain it. Our conclusion is that we are still in a phase of economic recovery. Growth will be somewhat lower because of the war, and inflation higher as a result of the energy shock.
The ECB is hawkish when it comes to inflation, but raising interest rates is truly the last thing we need when growth is under pressure
The European Central Bank (ECB) has already said that it may raise interest rates due to inflation.
‘That would be a terrible mistake. It should accept somewhat higher inflation. The ECB is hawkish when it comes to inflation, but raising interest rates is truly the last thing we need when growth is under pressure, there is an energy crisis, and a defense crisis as well. If the ECB were to move in the opposite direction, that would also go down very badly with European government leaders.
The EU is on its own and must put its house in order. It has no answer to the crisis in the Middle East, no answer to Trump, and no answer to what lies ahead for NATO. Do you really think the U.S. will come to help if Putin attacks Estonia? We need a European NATO, but it still isn’t happening.”
According to Strobaek, financial markets look through all this and see an economy that is behaving reasonably well, with major tech companies being driven by competition between the U.S. and China in the field of AI.
So what makes Europe attractive, given that we are nowhere when it comes to AI?
“European equities are cheap, and Europe still has companies that form a strong industrial backbone. German industry is important; the aviation and aerospace industries are unique. And unlike the U.S., Europe has many mid-sized companies. I also see many attractive small to mid-sized companies that are not under pressure from China but focused on the local market. Europe remains the largest economy. I don’t see us switching to Chinese AI either.”
Lombard Odier has not reduced its position in European equities, “but we are also very interested in emerging markets, which offer significant profit potential. My advice is: don’t run away – keep investing. It can be painful, but these conflicts will eventually pass.” Strobaek also invests in gold, “as protection for our portfolio.”
Where will the stock market be at the end of the year?
“I think European equities will be 5 to 10 percent higher than they are now.”
important information
This is a marketing communication issued by Bank Lombard Odier & Co Ltd (hereinafter “Lombard Odier”).
It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication.
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