Oil prices hovering above $100 per barrel, European stock markets down slightly

Investing.com - On Friday, European stock markets opened lower, despite the U.S. taking measures to allow countries to purchase some sanctioned Russian crude oil to ease global supply tensions. However, oil prices remain above $100 per barrel.

As of 04:04 ET (08:04 GMT), the pan-European Stoxx 600 index fell 0.7%, Germany’s DAX declined 0.9%, France’s CAC 40 dropped 1.0%, and the UK’s FTSE 100 decreased 0.8%.

The region’s stock markets showed weakness after Asian markets, reflecting investors’ little confidence that the joint U.S.-Israel strike on Iran will end soon. Major indices in South Korea and Japan, two key importers of Middle Eastern oil, each declined over 1.4%.

Like many Asian countries, several European nations heavily rely on energy transported through the Strait of Hormuz, a vital waterway surrounded on three sides by Iran.

Iran’s new Supreme Leader, Ayatollah Movahedi Khamenei, stated Thursday that the strait will remain closed until fighting ceases. Container shipping through this chokepoint has nearly come to a halt, with shipping companies worried that potential attacks could endanger crews. They have also struggled to find insurance for these increasingly dangerous voyages.

Despite recent efforts by the U.S. and the International Energy Agency to increase available oil supplies, the flow remains limited, causing Brent crude prices to surge again above $100 per barrel. Brent oil is highly volatile. Earlier this week, the global benchmark price briefly rose to nearly $120 per barrel before falling back below $90.

However, prices remain well above pre-conflict levels, raising concerns about rising global inflation pressures, which could dampen market expectations for central bank easing. In Europe, these concerns have pushed up yields on German and French government bonds, putting pressure on stock markets.

ING analysts stated in a report: “European and Asian stock markets are more severely impacted than U.S. markets. The longer the crisis lasts, the more pronounced this divergence will become.”

Inflation Data Becomes Focus

Against this backdrop, traders are closely studying the latest inflation data from France and Spain.

France, Europe’s second-largest economy, saw consumer prices rise 1.1% year-over-year in the 12 months ending February, in line with EU standards, up from 0.4% in January. Spain’s similar indicator accelerated slightly to 2.5%.

Later Friday evening, the U.S. January Personal Consumption Expenditures Price Index will be released. This indicator is closely watched by markets as it is one of the Federal Reserve’s preferred inflation measures.

Importantly, these data periods largely do not include the Iran war, which began in late February with large-scale U.S. and Israeli airstrikes on Iran. Since the conflict erupted, inflation outlooks have worsened, especially in Europe, where until recently economists believed price growth was broadly contained.