The meeting will not set interest rates, budgets, or trade rules. However, it takes place against a heavy backdrop: the return of Donald Trump, the war in Ukraine, high public debt, nervous bond markets, and a realignment of energy risk following the announcement of a deal between Washington and Tehran. The markets will be watching every signal closely.

Energy and Commodities: Securing Supply Chains

The first test will come from energy. The agreement announced between the US and Iran overnight reduces the risk of an oil shock, but it does not close the energy file. Markets will now monitor execution: the reopening of the Strait of Hormuz, mine clearing, sanctions and regional stability. Leaders from the United Arab Emirates, Qatar, and Egypt are expected in Evian on Tuesday.

According to Bloomberg, the United Kingdom and France are leading a European mine-clearing project for the Strait, which could be deployed within days. The issue is becoming very concrete: the goal is now to permanently secure this strategic route for global energy flows.

If traffic resumes quickly, the risk premium on oil could continue to ease, benefiting airlines, transport, chemicals and energy-intensive industrial players. Conversely, this scenario would maintain pressure on crude prices and majors such as TotalEnergies, Shell and BP.

Commodities will also remain under scrutiny. Critical metals, such as lithium, cobalt, graphite, nickel and rare earths, are essential for batteries, semiconductors, power grids and defense. Markets will therefore look for whether concrete measures will be implemented, such as strategic stockpiles, partnerships with producing countries, joint purchasing, or support for refining and recycling.

China: De-risking or a Trade Standoff?

The other highly anticipated dossier is China. Faced with the country's industrial overcapacity and low-priced exports, investors will analyze the tone of the communique to gauge what might happen in the coming months.

If leaders sharpen their tone and align with the hardline US position, this could rattle the markets. Emmanuel Macron has already raised the possibility of tariffs if Beijing does not correct its trade imbalance with Europe. Even without immediate sanctions, investors would fear an escalation of trade tensions. European groups that are the most exposed to China, such as luxury goods, automotive, chemicals, and semiconductors, would be particularly vulnerable.

The second, and indeed more probable, scenario is a somewhat vague text calling for caution. This would not solve the problem of Chinese overcapacity but would reduce the risk of a trade standoff. For European markets, and for the CAC 40 with its heavy exposure to luxury and global exporters, this would be a relief.

Ukraine and Defense: Sustainable Rearmament?

Ukraine will be another political marker of the summit. Volodymyr Zelensky is expected in Evian, where a session dedicated to supporting Kyiv is scheduled for Tuesday morning. For the markets, the issue is not just diplomatic support. Military budgets, sanctions against Moscow, energy and grain supplies are all at stake.

European defense stocks have already risen significantly in recent years. Rheinmetall, Leonardo, Thales, BAE Systems and Saab are already pricing in the idea of a long-term European rearmament. However, the path has become more complicated this year. Investors do not necessarily doubt the military need, but they increasingly doubt the ability of states to sustainably finance this effort. At these valuation levels, the market will look for concrete elements: multi-year funding, replenishment of stocks, industrial ramp-ups, equipment standardization - and the use of frozen Russian assets.

Bond Markets Join the Table

Another less spectacular, although perhaps more critical subject for markets is public debt. According to Bloomberg, governments have already issued $504bn in syndicated debt since January, a record for this stage of the year. This level even exceeds the first half of 2020, despite Covid-related spending. Italy is leading the trend, with nearly €70bn already raised.

For equities, this matter is of paramount importance. High long-term rates weigh on valuations, particularly for growth stocks. They increase the cost of capital, complicate refinancing, and weaken rate-sensitive sectors, such as real estate and utilities.

What the Market Will Take Away

The Evian summit is unlikely to produce a specific figure or a historic decision like a Fed meeting or an earnings release. However, it will tell investors whether major economies are capable of aligning themselves against already identified risks.

https://www.marketscreener.com/news/iran-ukraine-china-the-high-stakes-agenda-for-the-g7-ce7f5cdedc8cf021