European equity markets opened lower on Friday and looked set to post a second week of losses as escalating hostilities in the Middle East and mounting inflation fears curbed risk demand.
By 0806 GMT the pan-European STOXX 600 was down 0.8%, trading at 594 points, with all regional indexes in negative territory. Sectoral weakness was led by economically sensitive banks, which fell 1.9%.
Energy names provided some relief for investors. Major oil companies BP and Shell were among the better performers as benchmark crude prices traded above $100 a barrel.
Global markets continued to unwind this week amid an intensification of hostilities in the Middle East. The conflict described in recent market commentary - referenced as a U.S.-Israel war on Iran - was approaching the two week-mark, accompanied by a heavy exchange of drone and missile strikes across the region. Heightened rhetoric from former U.S. President Trump toward Iran, and Iran's stated intention to keep the Strait of Hormuz shut, contributed to concerns over energy-driven inflation and prompted traders to scale back expectations for rate cuts.
On the macroeconomic front, France's inflation rate rose by 1.1% year-on-year in February, while the British economy expanded by 0.2% in the three months to January, a reading that came in below market expectations.
Among individual stock moves, BE Semiconductor Industries saw its shares jump 10.8% after the chip equipment maker received takeover interest.
Investors remained cautious as geopolitical tensions and inflation dynamics intersected to influence sector positioning. Banks and other economically sensitive sectors bore the brunt of selling pressure, while energy firms benefited from the surge in crude prices. Market participants were also noted to be moderating bets on the timing of interest rate reductions amid the prospect of prolonged conflict and its potential effects on energy markets.
With developments in the Middle East and fresh inflation readings shaping near-term expectations, European markets ended the week with a defensive tone, reflecting risk-off positioning across several asset classes.