European equity markets registered modest gains at the opening bell on Friday as risk sentiment was bolstered by comments that raised the prospect of renewed talks in the Middle East.
By 03:13 ET (07:13), the pan-European Stoxx 600 had climbed 0.2%. Germany's Dax was up 0.4%, the U.K.'s FTSE 100 edged higher by 0.1% and France's CAC 40 was mostly unchanged.
The move followed a rally in U.S. shares after Israeli Prime Minister Benjamin Netanyahu suggested he was looking to engage in talks with Lebanon - remarks that helped underpin hopes for an extended U.S.-Iran ceasefire ahead of possible Washington-Tehran discussions this weekend. Despite that optimism, the truce remained tenuous.
Iran's foreign minister warned that Tehran would not send delegates to negotiations scheduled in Pakistan if Israel continued strikes against Hezbollah militants in Lebanon aligned with Iran. At the same time, Israel's military reported additional strikes on Hezbollah targets on Friday, and Netanyahu has stressed there is "no ceasefire" in Lebanon.
Operational constraints in key shipping lanes and damage to energy infrastructure heightened market caution. Tanker traffic through the Strait of Hormuz was reported to be at a near standstill, with one account noting shipping volumes through the narrow waterway off Iran's southern coast were well below 10% of normal levels on Thursday despite the ceasefire. Iran has been directing vessels to remain within its territorial waters for any transits.
Separately, bombardments of Saudi energy facilities were reported to have reduced the kingdom's oil output capacity by about 600,000 barrels per day and cut throughput on its East-West Pipeline by roughly 700,000 barrels per day, according to a Saudi state news report. Those disruptions, combined with the prospect of constrained traffic through the Strait of Hormuz, supported higher crude prices.
Brent crude futures were last up 1.4% at $97.24 a barrel, while U.S. West Texas Intermediate futures rose 1.4% to $99.25 per barrel. The temporary U.S.-Iran ceasefire has put oil on track for its largest weekly decline since June 2025, though benchmark crude remains substantially higher than levels before the start of the joint U.S.-Israeli assault on Iran in late February.
Market participants remain alert to the possibility that higher war-related oil costs could translate into renewed inflationary pressure, which in turn could prompt central banks globally to tighten monetary policy. Equities have shown volatility as investors try to gauge how developments in the Middle East will influence the path of interest rates in the months ahead.
Key points
- European indices opened with modest gains, led by the Dax, as hopes for talks in the region supported risk sentiment.
- Shipping through the Strait of Hormuz was reported at under 10% of normal volumes, and Iran has directed vessels to remain in its territorial waters while transiting.
- Reported damage to Saudi energy facilities reduced oil output capacity by about 600,000 barrels per day and cut East-West Pipeline throughput by roughly 700,000 barrels per day, contributing to higher crude prices.
Risks and uncertainties
- The ceasefire between the U.S. and Iran is fragile - continued hostilities could derail talks and renew market stress, affecting energy and broader equity markets.
- Disrupted shipping through the Strait of Hormuz and reduced Saudi output could sustain or lift oil prices, increasing inflationary pressure and potentially influencing central bank policy responses.
- Ongoing strikes in Lebanon and a lack of clarity on participation in planned Pakistan negotiations create uncertainty over the durability of any diplomatic progress, with potential knock-on effects for market volatility.