European equity markets moved lower on Thursday as uncertainty continued to surround potential peace negotiations in the Middle East. Iran rejected a U.S. proposal to temporarily halt the conflict, stating that any pause would only happen according to Tehran’s own conditions and timeline.
Markets were also responding to hawkish remarks from European Central Bank policymaker and Bundesbank President Joachim Nagel.
Nagel said the European Central Bank could raise interest rates at its next policy meeting in April “if the war in the Middle East raises the spectre of an inflation surge in the Eurozone.”
ECB President Christine Lagarde said on Wednesday that an inflation spike lasting beyond a brief period could justify an increase in borrowing costs.
On the economic front, new survey data indicated that German consumer sentiment is expected to weaken in April as economic concerns linked to the war in Iran weigh on households.
The forward-looking consumer sentiment index dropped to -28.0 in April from -24.8 the previous month, according to results released jointly by NIQ/GfK and the Nuremberg Institute for Market Decisions. Economists had forecast a smaller decline to -27.3.
While March data showed little change in consumers’ willingness to spend or save, expectations for household income fell significantly due to rising inflation concerns.
In the markets, Germany’s DAX index was down 1.4%, the U.K.’s FTSE 100 slipped 1.2%, and France’s CAC 40 declined 0.9%.
Bank stocks were among the decliners, with Commerzbank (TG:CBK), Deutsche Bank (TG:DBK), BNP Paribas (EU:BNP) and Barclays (LSE:BARC) each falling between 1% and 2%.
Shares of Henkel (TG:HEN) edged slightly higher after hair care brand Olaplex Holdings said it had entered into a definitive agreement to be acquired by the German consumer goods group.
Food delivery company Delivery Hero (TG:DHER) dropped 1.1% after issuing a cautious outlook.
French infrastructure group Vinci (EU:DG) also traded lower after agreeing to acquire a toll highway portfolio in India from Macquarie Asia Infrastructure Fund 2.
Swedish fashion retailer H & M Hennes & Mauritz (BIT:1HMB) fell 5.6% after first-quarter sales came in below expectations.
Energy majors BP Plc (LSE:BP.) and Shell (LSE:SHEL) moved higher as oil prices rose about 2%, recovering some of the previous session’s losses amid concerns that an extended conflict in the Middle East could further disrupt global supply.
Meanwhile, U.K. retailer Next Plc (LSE:NXT) surged about 6% after raising its profit outlook for 2026.
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