Which one is more reflective of the state of the markets, the sharp decline<\/a> or the quick recovery? If it’s the latter, is this a sustainable uptrend?<\/p>\n The Stoxx 600 index fell 12% earlier this year as the Iran war pushed energy prices much higher and raised inflation<\/a> fears.<\/p>\n The April 8 rally was in reaction\u00a0in the sense that it calmed some of the market’s worst fears.<\/p>\n Given the rapid change of geopolitical conditions, investors probably aren’t feeling certain that this is all behind us. That makes this rebound tentative.<\/p>\n There are still the issues of longer-term inflation risk and the economic impact of higher energy prices.<\/p>\n The Strait of Hormuz is still blocked, which means energy prices could keep going higher despite the ceasefire.<\/p>\n The problem I have with the strength of this rebound is that the underlying issues that caused the correction haven’t been resolved.<\/p>\n The original ceasefire agreement gave the markets the impression that a more complete resolution could be achieved during the two-week window. But the ceasefire proved to be tenuous.\u00a0Both the U.S. and Iran threatened further action. Israel attacked Lebanon. The situation appeared to get better in image only.<\/p>\n The markets understandably rallied from this because it at least represented an improvement, but let’s look at the reality of the situation today.<\/p>\n Talks for reaching a long-term resolution have been on and off and have so far been unsuccessful.<\/p>\n The Strait of Hormuz remains blocked. Both Iran and the United States are claiming blockades.<\/p>\n Energy-linked inflation rates have already gone much higher.<\/p>\n Brent crude oil prices are still hovering near $100 per barrel, up from around $72 at the end of February.<\/p>\n A relief rally based on the ceasefire was understandable. A sustained rally doesn’t seem justified.<\/p>\n Story Continues <\/p>\n In order to turn this into a market recovery that has the potential to establish new highs, a few things need to happen:<\/p>\n A reopening of the Strait of Hormuz that allows free passage for oil and cargo freight vessels, pulling energy prices back down<\/p>\n The return of annualized inflation rates back down into the 2% to 3% range<\/p>\n The markets pricing out the possibility of central bank rate hikes to address inflation<\/p>\n Corporate earnings that are able to hold up despite Q1’s higher costs<\/p>\n Once those are in place, I believe the market can return to pricing based on macro fundamentals, including earnings, GDP growth, and unemployment.<\/p>\n If you’re considering an investment in European stocks, three of the biggest Europe-focused ETFs are the Vanguard FTSE Europe ETF (NYSEMKT: VGK), the State Street SPDR EURO STOXX 50 ETF (NYSEMKT: FEZ) and the iShares Europe ETF (NYSEMKT: IEV).<\/p>\n Metric<\/p>\n VGK<\/p>\n FEZ<\/p>\n IEV<\/p>\n Expense ratio<\/p>\n 0.06%<\/p>\n 0.29%<\/p>\n 0.60%<\/p>\n 1-year return<\/p>\n 32.5%<\/p>\n 30.1%<\/p>\n 31.7%<\/p>\n Forward P\/E ratio<\/p>\n 16<\/p>\n 13.8<\/p>\n 15<\/p>\n Dividend yield<\/p>\n 2.8%<\/p>\n 2.6%<\/p>\n 2.8%<\/p>\n Coverage<\/p>\n All-cap Europe<\/p>\n Megacap Eurozone<\/p>\n Large-cap Europe<\/p>\n Data sources: Vanguard, State Street Investment Management, iShares. P\/E = price-to-earnings ratio.<\/p>\n Overall, I think the Strait of Hormuz is the key. Once the markets and the public see that ships are passing through like they were pre-conflict, everybody can finally breathe a sigh of relief. Tensions are likely to remain elevated for a while yet, but normal commerce should reassure the markets that the economic impacts might be mitigated.<\/p>\n However, I don’t think the current market rebound from the recent lows is locked in. There may still be hope that a long-term resolution is near, but stock prices appear to have gotten a little ahead of themselves.<\/p>\n Before you buy stock in Vanguard FTSE Europe ETF, consider this:<\/p>\n The Motley Fool Stock Advisor analyst team just identified what they believe are the\u00a010 best stocks<\/a> for investors to buy now\u2026 and Vanguard FTSE Europe ETF wasn\u2019t one of them. 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The Motley Fool has a disclosure policy<\/a>.<\/p>\n![\"Traders](\"https:\/\/www.newsbeep.com\/il\/wp-content\/uploads\/2026\/04\/b0e5bc8f7b5c7351cfc91247b9cd6408.jpeg\")
Image source: Getty Images. <\/p>\n