European shares fall as Iran–US tensions drive oil surge

European shares fell on Friday in broad-based losses as escalating tensions in the U.S.–Iran conflict pushed oil prices higher and weakened expectations of a near-term diplomatic resolution, News.Az reports, citing Reuters.

U.S. President Donald Trump said the ceasefire remained in effect despite continued clashes between forces in the Gulf region, while Washington waits for Tehran’s response to proposals aimed at ending the conflict.

The pan-European STOXX 600 dropped 0.9 percent to 610.96 points as of 0809 GMT, putting it on track for a weekly loss if current levels persist.

Major regional indices followed the same trend, with Germany’s DAX and London’s FTSE 100 falling 1 percent and 0.8 percent respectively.

“Once again, the news flow on the geopolitical front has shown that the path towards a lasting agreement is anything but linear,” said Chris Weston, head of research at Pepperstone.

He added that while the “buy the dip” mentality in risk assets remains strong, “risk management is the key theme of the day.”

European equities remain highly sensitive to geopolitical developments, with the region’s reliance on energy imports amplifying concerns over inflationary pressure and weaker economic growth.

Sentiment was further pressured by Trump’s warning that the European Union could face “much higher” tariffs if trade commitments are not fulfilled by July 4.

All ten major sector indexes declined in early trading, with financials and industrials among the worst performers, both down 1 percent.

Rheinmetall shares fell 5 percent after JPMorgan downgraded the stock to neutral from overweight. The German defence company had also reported first-quarter revenue below expectations earlier this week.

British Airways owner IAG dropped 2.1 percent after warning of lower-than-expected annual profits due to rising jet fuel costs. The broader travel sector index declined 1.2 percent.

Commerzbank announced plans to cut 3,000 jobs as it aims to strengthen profitability while resisting a takeover attempt by Italy’s UniCredit. Both companies saw their shares decline.

European Central Bank policymaker Isabel Schnabel warned of increasing risks of high inflation due to the Iran conflict, suggesting interest rates may need to rise further if the energy shock spreads.

Markets are currently pricing in three or more additional ECB rate hikes over the next 12 months.

“The ECB will likely go ahead with a decision to address the increased risks of inflation, although such a move would be less certain if tensions in the Persian Gulf ease rapidly,” Commerzbank economists said in a note.

Among individual movers, Amadeus gained 5.4 percent after the Spanish travel technology company reported quarterly core earnings above expectations and maintained its full-year guidance.

News.Az 

By Nijat Babayev