Europe close: Stocks lower as investors weigh likelihood of Iran peace talks

26th Mar 2026 15:15

(Sharecast News) - European equity markets closed sharply lower on Thursday as escalating uncertainty around ceasefire talks in the Iran war weighed on sentiment, while a surge in oil prices added to inflation concerns.

Comments from Donald Trump warning Tehran to "get serious soon" about negotiations or face severe consequences further unsettled investors.

As Dan Coatsworth, head of markets at AJ Bell, put it: "Investors look like they're fed up with the hot and cold messages around Iran peace talks."

The pan-European Stoxx 600 fell 1.13% to 580.84, with Germany's DAX down 1.5% at 22,612.97 and France's CAC 40 declining 0.98% to 7,769.31.

London's FTSE 100 dropped 1.33% to 9,972.17.

Energy markets moved sharply higher, with Brent crude rising 6.12% to $108.48 and West Texas Intermediate gaining 5.2% to $95.02, reflecting concerns over prolonged disruption in the Middle East.

"Brent crude rose more than 5% to around $108 per barrel as renewed US pressure on Iran kept supply concerns elevated, particularly around the Strait of Hormuz, where disruptions may persist," said Axel Rudolph, chief technical analyst at IG.

"Despite ongoing diplomatic efforts, Iran has rejected 'unacceptable' ceasefire proposals, while reports of potential shipping fees and increased US military presence underscore continued uncertainty.

"Meanwhile, most global equities fell as investors weighed the inflationary impact of higher energy prices and the likelihood of a prolonged conflict,".

Coatsworth added: "The fact the Vix fear index jumped 6% and oil prices rose by 5% would suggest recent market optimism about a resolution in the Middle East is fading fast."

At a cabinet meeting at the White House, Trump said Iran was "begging" to make a deal to end the war but warned that failure to agree would make the US "their worst nightmare", adding: "We'll just keep blowing them away. Unimpeded, unstopped."

He also said the Iranians were "great negotiators" but "lousy fighters," while insisting it was Tehran, not Washington, pushing for talks.

Earlier, an Iranian official told Reuters that the US proposal was "one-sided" and "unfair," adding there was "still no arrangement for negotiations" and no realistic plan for talks, despite mediation efforts from Turkey and Pakistan.

Coatsworth said: "Stock markets fell around the world as investors expressed their frustration.

"A gloomy economic outlook report from the OECD didn't help matters, flagging the impact of the Middle East crisis on inflation.

"Investors will have already been aware of the risk of costs going up but seeing it in black and white in the OECD report brought home the severity of the situation."

German consumer sentiment falls, Norgest Bank stands pat on rates

Economic data underscored the growing impact of the conflict on sentiment and inflation expectations.

In Germany, the GfK consumer sentiment index fell 3.2 points to -28.0 for April, with income expectations dropping 12.6 points to -6.3.

The survey warned that prolonged conflict could derail the country's modest recovery, with 60% of consumers expecting persistently high energy prices.

Rolf Buerkl at NIM said inflation concerns tied to higher oil and gas costs were weighing heavily on sentiment.

"Economic data points to a mixed global outlook, with weakening sentiment in Europe - Germany's consumer confidence hitting its lowest since March 2024 and France's manufacturing climate deteriorating - amid rising energy cost concerns linked to the Iran war," Rudolph said.

In Norway, Norges Bank left interest rates unchanged at 4% but signalled a likely increase at an upcoming meeting, citing persistent inflationary pressures exacerbated by higher commodity prices linked to the conflict.

Governor Ida Wolden Bache said inflation was expected to remain above target.

In the UK, consumer confidence deteriorated sharply, with the British Retail Consortium reporting a net balance of -53% for expectations of the economy, the lowest since records began in March 2024.

Personal financial expectations also weakened, while spending intentions rose as households anticipated higher energy costs.

Helen Dickinson, BRC chief executive, said rising energy prices were "particularly unwelcome for businesses and families" and had driven confidence to record lows.

Business activity indicators painted a similarly weak picture.

The Confederation of British Industry reported a growth balance of -35% for the three months to March, with services activity declining sharply and distribution sales expected to fall further.

Firms cited rising cost pressures, weak demand and uncertainty linked to the Middle East conflict as key headwinds.

The OECD also warned of rising inflation risks, cutting its UK growth forecast for 2026 to 0.7% from 1.2% while projecting inflation to rise to 4% this year before easing.

Secretary-general Mathias Cormann said the energy shock from the conflict was testing global economic resilience, while analysts highlighted the risk of further policy tightening if inflation accelerates.

Rudolph added: "The OECD expects global growth to hold at 2.9% in 2026 before edging higher, supported by tech investment and easing trade tensions, though the Middle East conflict continues to cloud the outlook, pushing inflation forecasts higher to around 4% in advanced economies."

In the US, initial jobless claims rose by 5,000 to 210,000 in the week to 21 March, in line with expectations, while continuing claims fell to 1.819 million, suggesting some resilience in the labour market despite broader macroeconomic uncertainty.

Rudolph said: "In contrast, US labour market indicators remain relatively resilient, with jobless claims stable and continuing claims falling to near multi-month lows, despite softer signals in earlier employment data."

Boliden slumps, Next rises on strong results

In equities, Swedish miner Boliden slumped 19.87% after warning of a hit to first-quarter profits due to production disruptions at its Garpenberg mine.

Edenred dropped 17.2% after Italy's competition regulator launched an investigation into potential abuse of its dominant position in the meal voucher market.

H&M fell 2.18% despite reporting a first-quarter profit beat, as subdued sales guidance weighed on sentiment.

On the upside, Next rose 4.2% after posting strong full-year results and raising guidance, although the retailer cautioned that ongoing instability in the Middle East could restrain growth in overseas markets.

Reporting by Josh White for Sharecast.com.