Investing.com – European stocks dropped on Friday, while oil prices remained elevated, as worries over the impact of fighting in the Middle East remained despite U.S. President Donald Trump’s decision to extend a deadline for renewed air attacks on Iranian energy infrastructure until April 6.
The pan-European declined 0.9%, the in Germany dipped 1.4%, the in France fell 0.9%, and the in the U.K. was flat%.
Writing on social media on Thursday, Trump said the extension came at the request of the Iranian government, which he claimed has been engaged in ongoing discussions with Washington. However, Tehran has so far denied that any such negotiations are taking place.
Last week, Trump issued an ultimatum threatening to strike power plants in Iran should Tehran not move to reopen the Strait of Hormuz in 48 hours. Early on Monday, he gave Iran until Friday to meet his demand.
Yet, crucially, the Strait of Hormuz remains effectively shuttered to tanker traffic. The closure of the vital waterway off of Iran’s southern coast, through which roughly a fifth of the world’s oil traverses, has placed massive pressure on the global economy, depriving countries of vital imports and fueling concerns of an energy-driven spike in inflation.
Expectations have subsequently grown that the European Central Bank will be forced to consider interest rate hikes in the months ahead, a notion reinforced by comments from some ECB policymakers this week. Government bond yields in Europe have climbed, with France’s 10-year bond yield in particular reaching its highest point since 2009.
There were few signs of that a breakthrough was imminent to conclude a conflict that has now been raging since joint U.S. and Israeli forces first bombarded Iran in late February. Media reports said Israel and Iran exchanged fresh missile launches on Friday.
Diplomats from the Group of 7 nations are set to meet in France, with the White House’s calls for international aid to help unblock the Strait of Hormuz likely to dominate discussions. So far, those demands have largely been rebuffed.
Against this backdrop, oil prices remained stubbornly elevated as the end of a topsy-turvy trading week approached. The futures contract expiring in May for Brent crude, the global benchmark, was last higher by 2.6% at $104.53 a barrel, paring back much a decline earlier this week and staying well above pre-war levels.
In individual stocks, shares rose after the French spirits maker confirmed that it was in merger discussions with Brown-Forman, the owner of the Jack Daniel’s whiskey brand.