European equity markets closed lower on Friday as investors continued to price in risks associated with the unfolding Middle East conflict, which market participants say has heightened inflationary pressures and dimmed short-term growth prospects worldwide.
By 0816 GMT the pan-European STOXX 600 was down 0.2% at 579.71 points. Media stocks led sector weakness, falling 1.4% and pulling on the broader index during a week that showed pronounced volatility. Earlier in the week the benchmark had briefly declined 10% from its February record high.
Market moves were influenced by comments from President Trump, who said he would again extend the deadline for Iran to reopen the Strait of Hormuz. At the same time, reports suggested he is also looking at sending more ground troops to the Middle East, a development that has raised concerns about a possible escalation.
Analysts and investors have focused on the strategic importance of the Strait of Hormuz for Europe. The continent depends on shipments that transit the waterway, and the prospect of the route being shut has increased worries about price pressures - particularly through a rise in energy costs.
Those concerns have been reflected in market expectations for monetary policy. Bets have risen to a 71% probability that the European Central Bank will raise interest rates in April, a notable shift from the stance of expecting no rate hikes for most of the year prior to the conflict.
On the individual stock front, Pernod Ricard advanced 3.6% after the spirits company said it is in talks about a potential merger with Brown-Forman, the owner of Jack Daniel's.
Overall, market participants cited the combination of geopolitical uncertainty, potential disruptions to shipping through a crucial maritime choke point, and the implications for energy prices as central drivers of the week's volatility and the altered outlook for interest rates.