Europe close: Markets mixed on higher oil prices, weak economic data

(Sharecast News) - European shares closed mixed on Thursday as higher oil prices and weak economic data linked to the Iran war weighed on sentiment, despite record earnings from Nvidia overnight.

The pan-European Stoxx 600 edged up 0.04% to 620.56.

Germany's DAX fell 0.53% to 24,606.77 and France's CAC 40 lost 0.39% to 8,086.00, while London's FTSE 100 rose 0.11% to 10,443.47.

In commodities, Brent crude futures were last up 1.81% on ICE at $106.92 per barrel, while the NYMEX quote for West Texas Intermediate rose 2.22% to $100.44.

Oil prices had fallen earlier after US president Donald Trump claimed that peace talks with Tehran were in their final stages.

However, Reuters reported that Iran's supreme leader Mojtaba Khamenei had directed that the country's near-weapons-grade uranium should not be sent abroad, citing two senior Iranian sources.

One source said the "consensus within the establishment" was that the enriched uranium stockpile should remain in Iran.

Israeli officials told Reuters that Trump had assured Israel that Iran's highly enriched uranium would be sent out of the country under any peace deal.

Israeli prime minister Benjamin Netanyahu said he would not consider the war over until enriched uranium was removed from Iran, Tehran ended support for proxy militias and its ballistic missile capabilities were eliminated.

Chris Beauchamp, chief market analyst at IG, said: "Now that Nvidia results are out of the way, it is back to focusing on Iran for global markets, and today has illustrated the uncertainty of the situation perfectly.

"Stocks had been steady and oil prices had dropped, but then headlines suggested the Iranian supreme leader would not allow enriched uranium to leave Iran.

"Hopes of progress were shattered, at least it seemed that way. But later the headline was denied, leaving investors none the wiser.

"Weeks of this lie ahead, potentially months, but Hormuz remains closed, a ticking time bomb underneath the global economy," he added.

Beauchamp said Iran was also discussing a permanent toll with Oman.

"Such a situation, unthinkable a few weeks ago, is now perhaps the best option for the global economy.

"A slightly higher price for products exiting the strait is infinitely preferable to the collapse of the global energy system, even if such a toll would represent a major failure for US policy."

Fresh data paints a downbeat European picture

Economic data painted a downbeat picture.

The flash S&P Global eurozone composite PMI fell to 47.5 in May from 48.8 in April, a 31-month low and below expectations for no change.

Services were particularly weak, with the business activity index dropping to a 63-month low of 46.4 from 47.6, while the manufacturing PMI eased to 51.4 from 52.2.

The survey showed declines in output, new orders, employment and confidence, while input prices rose at the fastest pace in more than three years.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the eurozone economy was taking an "increasingly severe toll" from the Middle East war, with output contracting for a second month and job losses becoming more widespread.

ING's Bert Colijn said markets had focused mainly on inflation risks, but the PMI data showed the growth impact should not be overlooked.

Eurozone construction output rose 0.8% in March after two months of declines, helped by a 5.7% jump in civil engineering work, the biggest monthly rise in that category since March 2021.

However, separate S&P Global data earlier this month showed the sector suffered its steepest downturn in nearly two years in April, as input cost inflation rose to its highest since October 2022.

The European Commission meanwhile cut its growth forecasts for the eurozone and wider EU because of the "energy shock" caused by the Iran war.

It now expected the EU economy to grow 1.1% in 2026, down from 1.4% previously, while eurozone growth is forecast at 0.9%, down from 1.2%.

The Commission raised its EU inflation forecast by a full percentage point to 3.1% this year, and now expects eurozone inflation of 3.0%, up from its previous path towards the European Central Bank's 2% target.

In the UK, consumer sentiment improved slightly in May but remained firmly negative, according to the BRC-Opinium consumer sentiment monitor.

Expectations for the economy over the next three months rose to -48 from -53, while expectations for personal finances improved to -16 from -21.

Helen Dickinson, chief executive of the British Retail Consortium, said confidence had lifted after signs of de-escalation in the Middle East, but warned that inflation was set to rise and more than four in five consumers expected food prices to climb.

UK business activity meanwhile contracted in May for the first time since April 2025, as domestic political uncertainty added to pressure from the Middle East war.

The flash S&P Global composite output index fell to 48.5 from 52.6, well below expectations for 51.6.

Services activity dropped to a 64-month low of 47.9, while manufacturing output rose to 52.4.

Williamson said the UK economy was facing a "perfect storm" of falling output, surging inflation, supply shortages and job cuts.

Danni Hewson, head of financial analysis at AJ Bell, said: "Looking at the latest PMI data, UK businesses are still feeling cautious and scaling back hiring plans as they ponder how long the Iran war and associated energy price shock might last."

Manufacturing orders also deteriorated.

The CBI's total new orders balance fell to -41 in May from -38 in April, the weakest reading since September 2020.

Cameron Martin, senior economist at the CBI, said the Middle East conflict was feeding through to higher energy costs and renewed supply-chain disruption, adding to weak demand and mounting cost pressures.

Hewson said the government's summer savings package had drawn a mixed response.

"As carrots go, the government's summer savings package announced today is one many cash-strapped British families won't be able to afford, even with the cut to VAT for various activities.

"For the hospitality sector, it's a sop that simply won't last long enough to make a real difference to their revenues which have already been hit by increased labour costs," she added.

Eutelsat jumps on SpaceX sentiment, Hexagon in the red

In equity markets, Eutelsat Communications jumped 22.46%, with the Paris-based satellite operator rallying ahead of SpaceX's planned IPO.

QinetiQ rose 7.88% after results, while easyJet gained 0.63% despite reporting that the Middle East conflict had delayed bookings and increased costs.

The low-cost airline posted a pre-tax loss of £552m for the six months to 31 March, compared with £394m a year earlier.

On the downside, Hexagon slumped 22.53%, snapping a period of market outperformance.

BT Group fell 4.94% after full-year adjusted revenue declined 4% to £19.6bn, mainly because of lower international revenue, although pre-tax profit rose 8% to £1.4bn.

Reporting by Josh White for Sharecast.com.