European equities declined on Thursday as growing speculation of potential U.S. intervention in the Middle East kept investors cautious ahead of several key central bank meetings.
By 07:15 GMT, Germany’s DAX index fell 0.7%, France’s CAC 40 dropped 0.7%, and the U.K.’s FTSE 100 declined 0.4%.
Rising Concerns Over U.S. Entry into Israel-Iran Conflict
Israel and Iran continued exchanging airstrikes on Thursday, with investor anxiety rising over the possibility that the United States might join Israel’s campaign against Iranian nuclear and missile sites. Such a move would significantly escalate the conflict and destabilize the region.
President Donald Trump added to the uncertainty on Wednesday, stating, “I may do it. I may not do it. I mean, nobody knows what I’m going to do,” when asked about U.S. involvement. He also noted, “Iran’s got a lot of trouble, and they want to negotiate.”
Bloomberg reported Thursday that senior U.S. officials are preparing for a possible strike on Iran as soon as this weekend, though the situation remains fluid.
In response, Iran’s Supreme Leader Ayatollah Ali Khamenei dismissed Trump’s earlier call for Iranian surrender, warning of “irreparable damage” should the U.S. intervene militarily. He affirmed, “The Iranian nation will not surrender.” Iran maintains its nuclear program is for peaceful purposes, despite the International Atomic Energy Agency’s recent declaration of Tehran breaching non-proliferation obligations for the first time in two decades.
Federal Reserve Holds Rates; Eyes Turn to European Central Banks
The Federal Reserve left its benchmark interest rate unchanged at 4.25% to 4.5% on Wednesday, as expected. Chair Jerome Powell reiterated a cautious stance on future rate cuts, highlighting inflation risks from Trump’s trade tariffs. The Fed still projects two more rate cuts in 2025 but trimmed expectations for 2026.
U.S. markets were closed Thursday for the Juneteenth holiday, shifting attention to upcoming monetary policy decisions in Europe. Norway, Switzerland, and the United Kingdom are set to announce policy moves soon.
The Bank of England is widely expected to keep rates steady, with markets focused on the vote split and forward guidance. Most analysts predict a rate cut in August.
The Swiss National Bank is likely to cut rates again, potentially moving back into negative territory, while Norway’s Norges Bank is expected to maintain its current stance.
Corporate Updates: Vodafone Names New CFO; Frasers Group Withdraws from Revolution Beauty Deal
European economic data and corporate earnings were limited. Vodafone (LSE:VOD) announced the appointment of Microsoft executive Pilar López as Chief Financial Officer, effective October 1. She will succeed Luka Mucic, who is stepping down.
Frasers Group (LSE:FRAS) confirmed it will not pursue an offer for British cosmetics retailer Revolution Beauty (LSE:REVB).
Oil Prices Rise Amid Conflict Concerns
Oil prices gained on Thursday amid worries that U.S. involvement in the Iran-Israel conflict could disrupt regional energy infrastructure.
At 03:15 ET, Brent crude futures climbed 1% to $77.47 per barrel, while U.S. West Texas Intermediate rose 1.1% to $74.31 per barrel.
Goldman Sachs estimated a geopolitical risk premium of about $10 per barrel is justified, given reduced Iranian supply and the threat of broader disruptions potentially pushing Brent crude above $90 per barrel.
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