European Stocks Slip as Middle East Conflict Intensifies;

European equities traded lower on Thursday as investors closely monitored the escalating conflict in the Middle East, now in its sixth day, and weighed the potential impact on global growth and energy markets.

At 08:02 GMT, Germany’s DAX fell 0.4%, France’s CAC 40 declined 0.4%, and the U.K.’s FTSE 100 edged down 0.1%.

Conflict Testing “Global Economic Resilience”

The war, which began with U.S. and Israeli missile strikes on Iranian targets over the weekend, has broadened significantly. A U.S. submarine reportedly sank an Iranian warship off Sri Lanka on Wednesday, while NATO air defenses intercepted an Iranian ballistic missile headed toward Turkey.

There are few indications that the conflict will ease soon. The U.S. Senate voted largely along party lines against a motion aimed at halting the air campaign and requiring congressional authorization for further military action.

Meanwhile, Mojtaba Khamenei, son of Iran’s slain supreme leader, has emerged as a leading contender to succeed him, according to the White House—suggesting Tehran is unlikely to yield to external pressure.

International Monetary Fund Managing Director Kristalina Georgieva warned that the conflict is testing “global economic resilience,” noting that if prolonged, it could significantly affect energy prices, market sentiment, growth, and inflation, placing additional strain on policymakers worldwide.

Inflation Concerns Weigh on Europe

Investor sentiment has also been dampened by concerns that surging energy prices could reignite inflationary pressures in Europe, a region heavily reliant on imported energy. This could increase pressure on the European Central Bank (ECB) to tighten monetary policy.

However, Bank of France Governor and ECB policymaker François Villeroy de Galhau said Thursday he currently sees no reason to raise interest rates. He acknowledged that the conflict could push inflation higher and growth lower, but emphasized that the magnitude of the impact will depend on the duration of the crisis.

Markets are also awaiting eurozone retail sales data later in the session, with January sales expected to rise 0.3% month-on-month and 1.7% year-on-year.

In Asia, China set its 2026 economic growth target at 4.5%–5%, slightly below last year’s 5% pace and the lowest target since 1991.

Corporate Earnings in Focus

On the corporate front:

• Reckitt Benckiser exceeded fourth-quarter like-for-like net sales expectations, driven by strong performance in emerging markets, and projected 4%–5% core business growth in 2026.

• Deutsche Post (DHL) forecast higher operating profit for 2026, broadly in line with market expectations despite worsening geopolitical conditions.

• Zurich Insurance reported its highest-ever annual profit in 2025, supported by a record performance in its U.S. operations.

• Galderma more than doubled its peak sales target for skin drug Nemluvio to over $4 billion after posting record annual net sales exceeding $5 billion for the first time.

• LEG Immobilien delivered full-year results above expectations but flagged a gradual rise in vacancy rates, tempering investor optimism.

Oil Prices Continue Climbing

Oil prices extended their rally as fears of supply disruptions mounted.

Brent crude futures rose 2.9% to $83.75 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 3.2% to $77.08 per barrel.

Both benchmarks have posted five consecutive sessions of gains, with Brent reaching its highest level since July 2024. Market concerns are centered on supply flows through the Strait of Hormuz, a key chokepoint through which roughly one-fifth of global oil and liquefied natural gas shipments pass.

Iran’s targeting of tankers in the Strait has effectively disrupted traffic through this critical energy corridor, intensifying fears of prolonged supply constraints.

Source: Investing.com