Europe close: Stocks in the red on renewed US-Iran tensions

(Sharecast News) - European stock markets fell on Thursday as renewed tensions between Washington and Tehran weighed on risk appetite, while investors digested a key US inflation reading and other economic data.

The pan-European Stoxx 600 fell 0.49% to 625.11.

Germany's DAX declined 0.34% to 25,092.25, France's CAC 40 lost 0.23% to 8,188.87, and London's FTSE 100 dropped 0.75% to 10,425.96.

In commodities, Brent crude futures were down 0.48% on ICE at $93.84 a barrel, while the NYMEX quote for West Texas Intermediate rose 0.35% to $88.99.

US president Donald Trump said he would not be rushed into a peace deal with Iran.

Speaking at a White House cabinet meeting on Wednesday, he also said he was not concerned about the potential political impact of the conflict.

Axel Rudolph, chief technical analyst at IG, said: "Markets welcomed reports that the US and Iran have reached a preliminary agreement to extend the ceasefire and reopen nuclear negotiations, though investor optimism remains tempered by uncertainty over whether president Trump will give the deal his final approval."

The US carried out fresh strikes on Iran on Wednesday, targeting a military site in the port city of Bandar Abbas and shooting down four Iranian one-way attack drones.

Iran's Islamic Revolutionary Guard Corps said it had retaliated by targeting a US air base in Kuwait.

Danni Hewson, head of financial analysis at AJ Bell, said: "Investors clearly don't know quite what to make of the current state of peace talks between the US and Iran, with conflicting reports about the kind of progress being made."

"The price of Brent crude has once again been choppy, though it has stayed below the psychologically important $100 a barrel," she added.

Rudolph said: "Crude fluctuated between gains and losses as investors awaited the outcome of possible de-escalation in the Middle East.

"The same was the case for precious metals and the greenback which rose towards its current May peak before changing tack in the afternoon."

Eurozone sentiment stable, US inflation broadly as expected

On the economic front, eurozone sentiment was broadly stable in May after falling to its lowest level in more than five years in April.

The European Commission's economic sentiment indicator rose 0.3 points to 93.5, beating expectations for a decline to 92.8.

The wider EU gauge also rose 0.3 points, to 93.7, as a partial rebound in confidence in services and among consumers was mostly offset by weakness in industry, retail and construction.

The employment expectations indicator for the EU rose 2.1 points to 95.4 but remained below its long-term average.

In the US, the Federal Reserve's preferred inflation gauge was broadly in line with expectations.

The personal consumption expenditures price index rose 0.4% in April and 3.8% year-on-year, while core PCE, excluding food and energy, increased 0.2% on the month and 3.3% annually.

Personal consumption expenditures rose 0.5%, driven by higher spending on services and goods, while the saving rate eased to 2.6%.

Separate data showed the US economy grew less than initially estimated in the first quarter.

The Bureau of Economic Analysis revised annualised GDP growth down to 1.6% from the initial estimate of 2.0%, though that still marked an acceleration from 0.5% in the fourth quarter of 2025.

Consumer spending growth was revised down to 1.4% from 1.6%, while gross private investment growth was cut to 7.0% from 8.7%.

US jobless claims also rose more than expected. Initial claims increased by 5,000 to 215,000 in the week ended 23 May, while continuing claims rose by 15,000 to 1.78m.

The four-week moving average climbed to 209,000, although both claims measures remained below last year's averages and continued to point to a resilient labour market.

Rudolph said: "Reports that the US and Iran have agreed on a 60-day framework to extend the ceasefire and restart talks over Tehran's nuclear programme have provided markets with cautious optimism - propelling several US stock indices to fresh records - although the proposed agreement still requires final approval from president Trump before it can formally proceed."

"US data was mixed with US PCE inflation coming in lower-than-expected but remaining elevated, a rise in personal spending having halved from the previous month, and GDP growth being revised lower in Q1."

Hewson said: "Whilst Wall Street rallied amid fresh reports that a ceasefire in the Middle East could be back on, London markets were able to break free from their early gloom."

"But for UK motorists it's all about another milestone, with the price of unleaded soaring to the highest level since the start of the war, according to RAC data," she added.

"Diesel prices have fallen from an earlier peak, but motorists are being warned the price of petrol could rise further in the coming days, putting even more pressure on household budgets."

Soitec surges, ex-divs drag on London

In equity markets, Soitec surged 24.64% in Paris after the semiconductor materials company said it had swung to positive free cash flow over its latest fiscal year and pointed to 15% sales growth in its first quarter.

Delivery Hero slipped 0.89% as investors continued to react to last weekend's news that Uber had made an indicative takeover proposal worth €10bn.

Uber had been building its stake in the delivery company and now held 36.83% of voting rights, while Hong Kong investor Aspex Master Fund cut its stake to 7.56%.

London's market was weighed down by a number of blue chips trading ex-dividend.

Kingfisher fell 2.59%, National Grid lost 3.7%, Severn Trent declined 2.63%, Associated British Foods dropped 3.01%, Hilton Food Group fell 5.26%, and Breedon Group was down 5.32%.

Hewson said: "Defence stocks were among the day's best performers buoyed by continued uncertainty, with Babcock International, BAE Systems and Qinetiq among those making gains.

"On the flip side, utilities and retailers were under pressure as the UK digested gloomy news about the state of the country's jobs market for younger workers."

Ferrari made up some ground after earlier losses in the week following the launch of its first electric vehicle.

Hewson said: "Shares in luxury automaker Ferrari made up some of the ground lost earlier in the week after the company unveiled its first all-electric model.

"CEO Benedetto Vigna has hit back at comments on social media criticising the car's design, saying they'd had lots of interest in the EV and would break down full details of order numbers later in the year," she added.

Reporting by Josh White for Sharecast.com.