European shares log second week of losses as Middle East war fuels inflation fears

Published Sat, Mar 14, 2026 · 12:14 PM

[BENGALURU] European shares extended their declines on Friday (Mar 13) and marked their second consecutive weekly loss, as the escalating conflict in the Middle East and inflation worries dented risk appetite.

The pan-European benchmark Stoxx 600 closed 0.5 per cent lower. All major regional bourses were in the red, posting marginal weekly falls.

Industrial stocks were the biggest drags on the index, down 1.8 per cent, with Siemens Energy down 5.7 per cent and Rolls-Royce off 5.3 per cent.

Miners experienced the biggest percentage loss, down 3.3 per cent, as prices of silver tumbled over 3 per cent, copper fell over 1 per cent and gold prices also ticked lower.

Global markets extended declines this week as the US-Israeli war on Iran approached the two-week mark. US President Donald Trump said the US was going to be hitting Iran “very hard over the next week”, prompting markets to brace for a drawn-out conflict and reassess interest-rate expectations as energy-driven inflation concerns resurfaced.

Pascal Koeppel, chief investment officer at Vontobel SFA Investment Management, said that both Iran and the US had interests in stopping the war. Iran’s interest is in re-opening the Strait of Hormuz, he said, while for the US a priority is reining in mounting defence costs before the midterm elections in November.

“It’s short term in nature and the impact on inflation and rates is not as big as market fear. But at the moment, the fear is larger so the European markets are correcting,” he said.

Markets have priced in one quarter-point interest-rate hike by the European Central Bank by the end of the year and see a nearly 75 per cent chance of another similar-sized move, per data compiled by London Stock Exchange Group. This contrasts with expectations earlier in the year that a rate cut was coming.

Oil prices were about 1 per cent higher on Friday, as it became clear that the Strait of Hormuz remained closed.

Energy stocks far outperformed others this week with a gain of nearly 5 per cent. Economically sensitive banks fell again, dropping 1.2 per cent. Standard Chartered and HSBC, the two global banks most exposed to the war with Iran according to Reuters analysis, extended their monthly declines to over 15 per cent each.

Data showed harmonised inflation in France rose 1.1 per cent year-on-year in February, while the British economy grew by 0.2 per cent in the three months to January, below expectations.

Among individual moves, BE Semiconductor Industries shares jumped 5.6 per cent after the chip-equipment maker fielded takeover interest, Reuters reported.

Berkeley Group cautioned that the conflict in the Middle East was weighing on risk sentiment, while reaffirming its annual profit outlook, sending shares of the home builder 1.5 per cent lower.

Zalando climbed about 7 per cent after Bernstein upgraded the online fashion retailer to “market perform” from “underperform.” REUTERS