European Stocks Decline as Iran Conflict Keeps Oil Prices Elevated

By 04:10 ET (08:10 GMT), the pan-European Stoxx 600 had fallen 0.7%, the Dax in Germany was down 0.9%, the CAC 40 in France had slipped 0.5%, and the FTSE 100 in the U.K. had lost 0.6%, according to Investing.com. The moves came as investors attempted to keep pace with rapidly changing developments in the Iran conflict.

Geopolitical Developments and Policy Signals

Tehran is reviewing a 15-point peace proposal from the United States, according to media reports, although both sides still appear far from an immediate accord to end the nearly month-old conflict. U.S. President Donald Trump has reportedly told aides he would like to see a swift resolution to the fighting, signaling that the White House is looking for an off-ramp from its joint assault on Iran with Israel, the Wall Street Journal reported.

Trump has claimed that Iran is now desperate to reach a deal to halt hostilities. However, this characterization conflicts with comments from the Iranian foreign minister, who has stated that Tehran has no intention of holding negotiations aimed at slowing down the war. This divergence in public messaging underscores the uncertainty surrounding any potential de-escalation.

Oil Markets, Inflation Concerns, and Central Bank Stance

Oil prices remained elevated as investors assessed the risk of a prolonged closure of the Strait of Hormuz, a key transit route for roughly a fifth of the world’s oil and natural gas. The threat of Iranian attacks has effectively shuttered the strait for weeks, pushing crude prices higher and reigniting concerns about a renewed spike in global inflation.

Some central banks have indicated that interest rate increases may return as a policy option in response to such inflationary pressures. On Wednesday, European Central Bank President Christine Lagarde said that an uptick in borrowing costs could be considered even in the event of “not-too-persistent” inflation driven by an Iran-related energy shock.

In commodities trading, the May futures contract for Brent crude, the global benchmark, was last up 2.8% at $105.04 a barrel. Brent has retreated from around $110 a barrel last week amid hopes for a possible resolution to the Iran war, but it remains well above levels seen before the conflict erupted in late February. Analysts have noted that, even if the war ends soon, investors may continue to demand a risk premium for oil in the near term, limiting any immediate return to pre-conflict price levels.

FAQ

Why did European stock indices fall on Thursday?
European stocks declined as investors reacted to ongoing uncertainty around the war in Iran, elevated oil prices, and renewed concerns over inflation and interest rate risks.

How has the Iran conflict affected oil prices?
The conflict has led to the effective closure of the Strait of Hormuz for weeks, supporting higher crude prices due to fears of disrupted supply through this critical energy corridor.

What did ECB President Christine Lagarde indicate about interest rates?
Christine Lagarde stated that the European Central Bank could consider raising borrowing costs even if inflation stemming from an Iran-related energy shock proves “not-too-persistent.”

Where is Brent crude currently trading relative to recent levels?
The May Brent futures contract was last up 2.8% at $105.04 a barrel, down from roughly $110 a barrel last week but still significantly above pre-conflict levels from late February.