Europe close: Stocks lower as investors watch US-Iran ceasefire

(Sharecast News) - European shares closed lower on Friday as the US and Iran exchanged fire in the Strait of Hormuz, raising concerns that the fragile ceasefire between the two countries may not hold.

The pan-European Stoxx 600 fell 0.77% to 611.66.

Germany's DAX declined 1.44% to 24,307.42, France's CAC 40 lost 1.19% to 8,104.58, and London's FTSE 100 slipped 0.43% to 10,233.07.

Oil prices rose, with Brent crude futures last up 1.44% on ICE at $101.50 a barrel and the NYMEX quote for West Texas Intermediate 0.79% higher at $95.56.

"While US stocks hit fresh highs amid strong earnings perspectives and robust labour market data, European equities dropped amid a flare up of tensions in the Middle East," said Axel Rudolph, chief technical analyst at IG.

US president Donald Trump insisted the ceasefire remained in place and dismissed the latest exchange as a "love tap".

Iran accused the US of violating the agreement by targeting two ships in the Strait of Hormuz and hitting civilian areas, while Washington said it fired in retaliation after three US Navy destroyers were attacked in the key waterway.

Trump said the destroyers had not been damaged and claimed "great damage" had been done to the "Iranian attackers".

"They trifled with us today. We blew them away," he said, while also saying negotiations with Tehran were continuing.

"The talks are going very well, but they have to understand if it doesn't get signed, they're going to have a lot of pain. I believe they want the deal more than I do."

Iranian media later reported that after several hours of fire the situation in and around the Strait of Hormuz was "back to normal", although both sides accused the other of firing first.

The ceasefire was extended on 21 April, and Washington is waiting for Tehran to respond to its latest proposal for a permanent peace deal intended to end the war and reopen the strait, through which around 20% of global oil and liquefied natural gas supplies normally pass.

"European markets didn't fare so well, though, with particularly Europe's largest economy and stock market - the DAX 40 - extending Thursday's sharp sell-off amid concerns over high energy prices with Brent crude trading back around the $100 mark amid heightened tensions in the Gulf region," Rudolph said.

German industrial production falls in March

Economic data added to the cautious tone.

German industrial production fell 0.7% month-on-month in March, according to the Federal Statistical Office, while February's reading was revised lower.

Output was more than 1% weaker in the first quarter than in the final three months of 2025, as higher costs and weak global demand weighed on manufacturing.

Export growth slowed to 0.5% from 4.7% in February, while imports rose more than 5%, narrowing Germany's trade surplus to its lowest level since November.

In the UK, retail footfall slumped in April as the Iran war hit consumer confidence, according to the British Retail Consortium.

The BRC-Sensormatic monitor showed total footfall fell 10.7% year-on-year, compared with 2.4% growth in March.

High street footfall dropped 9.2%, retail parks declined 9%, and shopping centres fell 10.1%.

Helen Dickinson, chief executive of the BRC, said the Middle East conflict had pushed consumer confidence to new lows, prompting shoppers to make fewer trips, and warned that higher inflation could limit appetite for spending.

UK house prices also edged lower in April, with Halifax reporting a 0.1% monthly decline after March's 0.5% fall.

The average property price stood at £299,313, while annual growth slowed to 0.4% from 0.8%.

Amanda Bryden, head of mortgages at Halifax, said higher energy prices had fed into inflation expectations and prompted markets to reassess the path for interest rates, pushing up borrowing costs for many buyers.

She said activity was likely to cool in the near term, but the market remained relatively stable, supported by wage growth running ahead of house price inflation.

Patrick Munnelly, market strategy partner at TickMill, said: "The FTSE 100 closed weaker into the weekend, as broad macro optimism faded and a rising UK political-risk premium took over the tape.

"Early local election results delivered heavy losses for Keir Starmer's Labour Party, while Reform UK made major gains, reinforcing the view that Britain's traditional two-party system is splintering.

"Starmer said he would not resign, but investors are now forced to price a more unstable domestic policy backdrop, with Bank of America warning that any Labour leadership challenge - particularly one that shifted the party left - could raise concerns over borrowing and fiscal discipline."

In the US, non-farm payrolls rose by 115,000 in April, well above expectations for a 63,000 increase, while the unemployment rate held steady at 4.3%.

Hiring was led by health care, transportation and warehousing, and retail, while federal government and information-sector employment declined.

Average hourly earnings rose 0.2% on the month and 3.6% year-on-year, while revisions left February and March employment a combined 16,000 lower than previously reported.

Rudolph said: "US non-farm payrolls rose by a stronger-than-expected 115,000 in April, signalling a cooling but still resilient labour market as gains in healthcare, transport and retail offset continued weakness in government and manufacturing employment.

"Wage growth came in slightly lower than expected while the unemployment rate remained at 4.3%.

"US stock indices powered ahead with several hitting record highs as strong earnings and Friday's positive jobs data offset risks from the war in the Middle East and US consumer sentiment dropping to a record low."

IAG, Intertek among the fallers

Among equities, IAG fell 1.77% after the British Airways and Aer Lingus owner issued a profit warning because of the Iran war.

"Single-stock news added to the downside," Munnelly said.

"IAG fell after warning annual profit would be lower than forecast and flagging a sharp rise in jet-fuel costs, highlighting how geopolitical shocks are feeding directly into corporate guidance."

Intertek dropped 2.7% after the testing and assurance specialist rejected private equity group EQT's sweetened £8.93bn offer, saying it "significantly undervalues" the company.

Intertek said it remained committed to a spinoff or demerger of its energy and infrastructure division.

"Intertek also dropped after rejecting EQT's third sweetened takeover proposal, worth £8.93bn, as investors marked down the chance of a near-term bid premium," Munnelly added.

"The day's message from earnings and corporate news was blunt - investors are not rewarding 'maybe' catalysts, and they are punishing any sign that cost inflation or deal uncertainty could cap upside."

Reporting by Josh White for Sharecast.com.