European Stocks Pull Back

European equities closed firmly lower on Thursday, trimming the sharp gains from last session as fragility in the ceasefire between the US and Iran threatened hopes of lower energy prices in the near future. The Eurozone's STOXX 50 fell 0.6% to 5,878 and the pan-European STOXX 600 fell 0.4% to 611. Iran claimed that the US violated their ceasefire agreement, adding to concerns that de-escalation could be only momentary and maintain the current surge in oil and gas prices as Tehran maintained threats on tankers in the Persian Gulf. Bond yields rebounded and pressured banks, with Santander, BBVA, and Nordea dropping 1.5% each. The rebound in natural gas prices also pressured power-hungry industrial giant, with Airbus and Siemens losing more than 2%. In turn, energy producers benefited from the surge in oil prices, with Eni and TotalEnergies soaring over 3%.

European stocks traded lower on Thursday, with the STOXX 50 falling 0.6% and the STOXX 600 declining 0.4%, following strong gains in the previous session that marked the largest rally in a year. Investor optimism over the US–Iran ceasefire began to fade as concerns about the deal’s durability resurfaced, after Tehran warned that certain terms had been breached. Meanwhile, Israeli strikes in Lebanon continued, and the Strait of Hormuz remained nearly closed, driving oil prices higher once again. Consumer cyclicals were the worst-performing sector, while basic materials outperformed. Among megacaps, ASML Holding (-0.6%), HSBC Holdings (-0.6%), LVMH (-2.5%), SAP (-2.7%), and Hermès (-1.2%) posted notable declines. Volvo (-4.8%), Grifols (-3.9%), Ocado (-3.8%) and Lufthansa (-3.8%) were among the worst performers. Energy stocks on the other hand, were in the green, including Shell (0.9%), TotalEnergies (0.6%) and Iberdrola (0.5%).

European equity markets were set to open largely unchanged on Thursday as investors assessed the durability of the US-Iran ceasefire. Sporadic fighting persisted across the Middle East, with Israel carrying out fresh strikes on Lebanon. A senior Iranian official said elements of the ceasefire proposal had already been breached, while Tehran continued to largely block the Strait of Hormuz. On Wednesday, European shares rallied broadly on relief after the ceasefire agreement pushed oil prices lower, easing inflation concerns. Elsewhere, minutes from the US Federal Reserve’s latest policy meeting showed a growing number of members saw a potential rate hike as necessary to curb inflation, though many still hoped the next move could be a cut. In Europe, investors will turn their attention to Germany’s February trade data. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were little changed.