European Stocks Stall as Middle East Tensions Revive Inflation Fears

European stock markets were little changed on Friday as resurgent geopolitical tensions in the Middle East stoked inflation fears, eclipsing a temporary boost from the technology sector. The pan-European STOXX 600 index was flat in early trade, putting it on course for a weekly loss of nearly 2%, its most significant since mid-April.

Geopolitical Risks Rattle Investors

Market sentiment soured following reports of escalating military action between the United States and Iran. According to reports, the U.S. military conducted airstrikes on dozens of Iranian targets on Wednesday, prompting retaliatory strikes from Iran on U.S. assets in the region.

The conflict has severely disrupted maritime traffic through the critical Strait of Hormuz, a key global shipping lane. This disruption pushed Brent crude oil prices back toward $77 a barrel, reversing a recent downward trend in fuel costs that had provided some relief for global central banks considering interest rate policy.

Tech Rally Loses Steam

An initial wave of optimism in the technology sector failed to sustain momentum. The brief rally was sparked by the successful U.S. Nasdaq listing of South Korean semiconductor giant SK Hynix, which raised $26.5 billion in one of the largest share sales on record.

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While the heavily oversubscribed offering initially lifted AI-exposed and semiconductor stocks, the enthusiasm was short-lived as broader macroeconomic uncertainties and concerns over high valuations led investors to adopt a more defensive posture.

Market Snapshot

Across the region, major bourses showed a mixed but muted performance:

• Germany’s DAX and France’s CAC 40 were both flat.
• London’s FTSE 100 and Italy’s FTSE MIB each posted modest gains of 0.3%.

In corporate news, shares of Easyjet surged 13% after the airline confirmed a takeover approach from Apollo. Vodafone stock climbed 12% following news that French telecom entrepreneur Xavier Niel had acquired a significant stake. Conversely, shares in St. James's Place fell approximately 5% after one of its advisory firms announced its departure.