Investing.com – European stock markets were mostly higher on Friday following Israeli Prime Minister Benjamin Netanyahu’s suggestion that he was looking to engage in talks with Lebanon.
Meanwhile, a Bloomberg News report in which Ukraine’s top negotiator said he has seen progress toward a possible peace deal with Russia has also buoyed sentiment. European construction stocks were bolstered as analysts looked ahead to potential reconstruction in Ukraine, with , , and all up.
Defense and aerospace stocks, which have benefited from a war-fueled outlook for increased military spending in Europe, fell. and both slipped by more than 5%.
The pan-European Stoxx 600 gained 0.4%, the in Germany climbed 0.2%, the in the U.K. was flat, and the in France rose by 0.2%.
Shaky U.S.-Iran ceasefire
While Netanyahu’s comment helped to bolster hopes for a prolonged U.S.-Iran ceasefire ahead of potential discussions between Washington and Tehran this weekend, the truce remains fragile. Iran’s foreign minister has said delegates from the country would not attend the negotiations in Pakistan should Israel continue strikes against Hezbollah militants in Lebanon aligned with Tehran.
Israel’s military said that it had hit more Hezbollah targets on Friday, while Netanyahu himself has clarified that there is “no ceasefire” in Lebanon.
All the while, tanker traffic through the Strait of Hormuz is still near a virtual standstill, with Reuters reporting that shipping through the narrow waterway off of Iran’s southern coast was well below 10% of normal volumes on Thursday despite the ceasefire. Iran, whose chokehold on the strait has threatened the flow of around a fifth of the world’s oil, has told vessels that they must keep to its territorial waters while making any sailings.
Several Asian countries are heavy importers of crude products which traverse the strait, while Europe uses natural gas from Persian Gulf nations which have been targeted by Iranian attacks.
Bombardments of Saudi energy facilities have also slashed the kingdom’s oil output capacity by about 600,000 barrels per day and throughput on its East-West Pipeline by roughly 700,000 barrels per day, Saudi state news agency SPA reported on Thursday.
The prospect of slow protracted shipping through the Strait of Hormuz and a decline in production in Saudi Arabia, a major crude center in the Middle East, pushed up oil prices.
futures, the global oil benchmark, was last higher by 1.4% at $97.24 a barrel, while U.S. West Texas Intermediate crude futures had ticked up by 1.4% to $99.25 per barrel. The temporary U.S.-Iran ceasefire has put oil prices on track for their biggest weekly decline since June 2025, although crude is still well above levels before the start of the joint U.S.-Israeli assault on Iran in late February.
War-related increases in oil costs have fueled fears of an inflation surge that could spark monetary policy tightening by central banks around the world, including the European Central Bank. Government bonds have gyrated as investors attempt to suss out how developments in the Middle East will impact the path for interest rates in the coming months, swaying movements in equity markets.
Possible insight into the war’s inflationary effects could come later in the day, when the March gauge of U.S. consumer price growth is due to be released. Economists are widely anticipating that the headline reading will accelerate sharply compared to February, largely because of a surge in gasoline pump prices following the Iran-linked energy shock.
“Markets aren’t being provided with clear direction at the moment. There is a strong sense that the ceasefire is fragile, with ongoing Israeli attacks in Lebanon proving a key friction in U.S.-Iran negotiations,” analysts at ING said in a note.
Elsewhere, in individual corporate names, French food caterer slashed its annual sales and profit targets, while U.K. electronics seller predicted that annual income would be at the top end of its forecast range.