The pan-European benchmark STOXX 600 closed 0.5% lower. All major regional markets were in the red, after a week of slight declines.
Industrial stocks were the biggest losers in the index, down 1.8%, with Siemens Energy down 5.7% and Rolls-Royce down 5.3%.
Miners experienced the biggest losses, down 3.3%, as silver fell more than 3%, copper fell more than 1% and gold also fell.
Global markets extended declines this week as the US-Israel war over Iran neared the two-week mark. U.S. President Donald Trump said the United States would strike Iran “very hard” next week, prompting markets to brace for an escalating conflict and reassess interest rate expectations as concerns about energy-driven inflation rose.
Pascal Koppel, chief investment officer at Vontobel SFA Investment Management, said both Iran and the US have interests in stopping the war. He said Iran’s interest is in reopening the Strait of Hormuz, while the priority for the US is increasing defense spending ahead of midterm elections in November.
“It’s temporary in nature and the impact on inflation and prices is not as big as market fears. But at the moment the fear is widespread so European markets are fine,” he said. Markets are pricing in a quarter-point interest rate hike by the European Central Bank by the end of the year and see a roughly 75% chance of another move of the same size, based on data compiled by LSEG. This contrasts with expectations at the beginning of the year that prices will drop.
Oil prices were about 1% higher on Friday, as it became clear that the Strait of Hormuz remains closed.
Energy stocks fared better this week with gains of nearly 5%. Economically sensitive banks fell again, falling 1.2%. Standard Chartered and HSBC, the two global banks most exposed to war with Iran according to a Reuters analysis, extended their monthly declines to 15% each. Data showed that coordinated inflation in France rose 1.1% year-on-year in February, while Britain’s economy grew 0.2% in the three months to January, less than expected. Among individual moves, shares of BE Semiconductor Industries rose 5.6% after the chip equipment maker received a takeover interest, Reuters reported. Berkley Group warned that conflict in the Middle East was weighing on risk sentiment, while reaffirming its annual profit outlook, sending the homemaker’s shares down 1.5%.
Zalando rose about 7% after Bernstein upgraded the online fashion retailer to “market perform” from “underperform.”
